UK's IG Group to buy DailyFX from FXCM Inc for $40 mln (updated)

Global Brokerage

30/09/2016 10:27

(Adds analyst comments, details, share movement) 
    Sept 30 (Reuters) - Online trading company IG Group Holdings 
Plc  IGG.L  said it had agreed to buy news and research portal 
DailyFX and its associated assets from U.S. retail broker FXCM 
Inc  FXCM.O  for $40 million. 
    IG Group said the deal, which is expected to close by the 
end of October, would add about 5 million pounds ($6 million) to 
ongoing operating costs annually and add to earnings from IG's 
2018 financial year.  urn:newsml:reuters.com:*:nRSd2715La  urn:newsml:reuters.com:*:nGNXNHGCLa 
    The British company also said it expected to account for the 
purchase price at a constant rate spread over 10 years.  
    Analysts said this meant total costs of 8 million pounds, 
after adding 3 million pounds in amortisation annually. 
    IG Group, which has over 152,600 active clients according to 
its website, said the deal would "significantly enhance" its 
ability to bring on new clients and improve the retention rates 
of  current clients. 
    "Our discussions with IG this morning indicate that IG is 
not buying a revenue stream but instead a client recruitment 
engine," RBC analysts said. 
    "While client recruitment and retainment are positives, this 
acquisition does add to an already rapidly increasing cost 
base," the analysts added. 
    IG Group said this month that financial markets had become 
"increasingly subdued" in the two months after Britain's shock 
vote to leave the European Union, presenting clients with 
limited trading opportunities.  urn:newsml:reuters.com:*:nL8N1BW0SU 
    Upon completion, the DailyFX business along with its web 
domains, source code, content and 34 employees will be 
transferred to IG, FXCM said. 
    Assuming a cost base of 8 million pounds and revenue per 
client of 2,000 pounds, DailyFX needs to add 4,000 customers 
every year to break even, Barclays analysts said.  
    FXCM, which is the largest U.S. retail broker, with about 
200,000 customers worldwide and 88,000 in the United States, 
said it would use the proceeds from the sale to repay debt owed 
to Leucadia National Corp  LUK.N . 
    FXCM, reeling after customers lost more than $200 million 
from the surging Swiss franc early in 2015, borrowed $300 
million from Leucadia to keep operating. http://reut.rs/2drwhuW 
    "While DailyFX is a high quality asset and was not a 
targeted asset to sell, the opportunity came along and it was 
something we felt we should take advantage of," FXCM CEO Drew 
said. 
    "At this time, we do not plan on selling any other retail FX 
assets..." he added.  
    IG's shares were up 0.058 percent at 865.5 pence at 0847 GMT 
on the London Stock Exchange.  
    ($1 = 0.7715 pounds) 
 
 (Reporting by Noor Zainab Hussain in Bengaluru; Editing by 
Sunil Nair) 
 ((noor.hussain@thomsonreuters.com; Within UK +44 20 7542 1810; 
Outside UK +91 80 6749 2764; Reuters Messaging: 
noor.hussain.thomsonreuters.com@reuters.net)) 
 
Keywords: DAILYFX M&A/IG GRP HLDGS