Blog Coverage Cowen Group Adds Muscle to its Brokerage and Trading Business with Acquisition of Convergex

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LONDON, UK / ACCESSWIRE / April 4, 2017 / Active Wall St. blog coverage looks at the headline from Cowen Group Inc. (NASDAQ: COWN) as the New York based financial services Company announced the acquisition of brokerage firm Convergex Group LLC on April 03, 2017. The cash and stock deal is valued at approximately $116 million. Register with us now for your free membership and blog access at:

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One of Cowen Group’s competitors within the Investment Brokerage – National space, Interactive Brokers Group, Inc. (NASDAQ: IBKR), is expected to report its fiscal quarter ending March 2017 earnings results on April 18, 2017 after market close. AWS will be initiating a research report on Interactive Brokers following the release of its next earnings results.

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About Convergex

New York City based Convergex is an agency-focused global brokerage and trading related services provider. Its business is divided into verticals like equity sales and electronic trading, commission management, prime services and global clearing. Its bouquet of products include algorithm trading, ETFs (Exchange Traded Funds), ADRs (American depositary receipt), Millennium ATS (a SEC-registered alternative trading system) and PerformEx (a global, real-time analytics dashboard).

The deal

Cowen will acquire Convergex from private equity firm GTCR, Bank of New York Mellon, and other investors. Cowen will pay these investors a mix of cash plus common stock of Cowen. The cash portion has been finalized at $116 million; however, the transaction price would be adjusted based on the book value of Convergex at the time of closing of the transaction. Cowen plans to utilize its cash in hand to finance the majority of the deal with additional cash funds from Convergex at the time of closing. Cowen plans to utilize its common stock to cover any gap in the transaction price at the time of closing of the deal. The exact ratio of cash and stock will be finalized at the time of closing of the transaction. The deal is expected to close in the Q2 2017 and is subject to closing conditions and regulatory approvals. The closing of the Cowen/Convergex deal is independent to the closing of the CEFC China/Cowen deal.

China Energy Company Limited (CEFC China) on March 29, 2017, made an equity investment of approximately $100 million in Cowen and acquired 19.9% of Cowen’s outstanding common shares. CEFC China has also offered Cowen approximately $175 million in long-term debt financing. CEFC China/Cowen deal is expected to close in Q3 2017.

Commenting on the acquisition, Jeffrey M. Solomon, President of Cowen said:

“The addition of Convergex’s global platform will also establish meaningful scale for Cowen’s equities business by significantly bolstering our capabilities in prime services, commission management, algorithmic and electronic trading, as well as clearing services.”

Eric W. Noll, President and CEO of Convergex Group added:

“The ability to combine with a great research based firm like Cowen, which has complementary businesses with minimal client overlap, creates a tremendous opportunity for our people and our clients. By forging this combination with enhanced experience and expertise, our respective clients will now have access to a wider array of global offerings and innovative solutions.”

Benefits for Cowen Group

The deal will result in Cowen becoming one of the leading financial services firm with an independent trading platform in equities backed by high quality research and best-in-class global execution capabilities. The combined brokerage revenue of both firms for FY16 exceeds $400 million. This will help Cowen cement its position as a leader in terms of trading volumes and in terms of geographical reach including lucrative markets like China. Cowen expects the acquisition to be accretive to its earnings per share and shareholder value in 2018.

Cowen will also gain access to Convergex’s client base of 2,500 hedge funds, asset managers, broker-dealers, trusts and exchanges.

The Cowen/Convergex deal is the latest in the wave of consolidation in the financial services and brokerage firms. Rising cost of transactions and lower trading volumes are affecting the profitability of trading and brokerage firms. This has led to a number of firms combining their operations to survive the competition.

Stock Performance

At the closing bell, on Monday, April 03, 2017, Cowen Group’s stock fell 4.35%, ending the trading session at $14.30. A total volume of 554.15 thousand shares were traded at the end of the day, which was higher than the 3-month average volume of 331.09 thousand shares. In the last month, shares of the Company have advanced 0.35%. At Monday’s closing price, the stock’s net capitalization stands at $477.19 million.

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