(Adds analyst comments, details, share movement)
Sept 30 Online trading company IG Group Holdings
Plc said it had agreed to buy news and research portal
DailyFX and its associated assets from U.S. retail broker FXCM
Inc 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.
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.
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.
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. 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
"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