Earlier this week, Thomson Reuters stepped up to the plate and made a tender offer of $22 per share for a 100% stake in FXAll, an electronic foreign exchange broker. The deal is being priced at around $616 million to $625 million. Not too shabby for a company whose share price closed at $15.70 last week!
Now, lemme give you a brief background on each company.
Thomson Reuters is one of the leading news and information providers in the world. Aside from being an international news agency, it also controls the Thomson Reuters Spot Matching platform, which, if you remember from your lessons in the School of Pipsology, is one of the two major liquidity providers for the interbank market.
FXAll is an independent online broker that caters to over 1,000 different financial institutions. Its business model centers around providing access to different types of foreign exchange products to its clientele, which includes banks, broker-dealers, hedge funds, asset managers, and other financial corporations.
The question is, "why is Thomson Reuters looking to expand and acquire FXAll?"
For one, they believe that synergies exist between the two companies. According to FXAll CEO Phil Weisberg, integrating FXAll's platform with the resources provided by Thomson Reuters will lead to greater innovation and better service towards its clients.
Secondly, the acquisition would allow Thomson Reuters to diversify its services from being just a data-provider. Thomson Reuters handled an average of $154 billion a day in May. Add to that the $98.6 billion that went through FXAll in June, and Thomson Reuters could easily become the owner of the biggest electronic trading pool in the foreign exchange market.
The move could also benefit everyday traders, like you and I, as it could lead to a more integrated trading experience. The Thomson Reuters side could provide a venue for traders to have access to key information needed in trade analysis. Meanwhile, the integration of the two platforms should lead to better execution.
As for the industry in general, the acquisition follows the trend wherein bigger companies buy out smaller ones. This should be good news for market participants as it weeds out scammers and other businesses that don't necessarily have the interests of their customers in mind.
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