KCG Holdings Inc. (KCG) recently signed an agreement to sell its subsidiary – Urban Financial Group (Urban) – to an investor group. The deal is subject to certain regulatory approvals and is expected to close by fourth-quarter 2013.
KCG Holdings was formed last month after Global Electronic Trading Company or Getco LLC acquired the troubled automated trading firm – Knight Capital Group. Notably, in Jun 2013, Knight Capital Group sold its credit-brokerage division to Stifel Financial Corp. (SF), while earlier this year Getco closed its office in Hong Kong.
Therefore, Knight Capital and Getco were on a restructuring and streamlining spree, which continues even after the completion of merger deal.
Amid sluggish economic backdrop with limited scope for increasing revenues, KCG holdings intend to streamline business and focus on its core business of security trading. Notably the current divestment plan will release approximately $80.0 million, comprising cash as well as retained net assets.
On the other hand, Brian Libman, who heads the investor group to acquire Urban, relies on its financials, market share gains and operating excellence. He intends to capitalize on these positives and deliver enhanced services to customers amid the current market conditions.
Bank of America Corporation (BAC) is acting as an advisor to KCG Holdings on the divestment deal.
Our Take
The deal will enable KCG Holdings focus on its area of specialization and prudently manage costs, thereby driving long-term profitability.
Currently, KCG Holdings carries a Zacks Rank #3 (Hold). A better performing stock in the same sector is TD Ameritrade Holding Corp. (AMTD), which has a Zacks Rank #1 (Strong Buy).
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