19th Nov 2007 07:01
IG Group Holdings plc19 November 2007 IG Group Holdings plc 19 November 2007 IG Group Holdings plc ("IG" or "the Group") agreed on Friday 16th November topurchase the entire issued share capital of HedgeStreet Inc ("HedgeStreet") for$6.0m, approximately £2.9m. Up to half of the consideration may be satisfied bythe issue of IG shares. The balance of consideration will be paid in cash. Theconsideration mix will be determined prior to completion of the acquisition,which is expected to be within 21 days. HedgeStreet is a US company which, since 2004, has operated the HedgeStreetExchange ("the Exchange"). The Exchange is a US based Designated ContractMarket operating under the regulatory oversight of the US Commodity FuturesTrading Commission ("CFTC"). HedgeStreet is also registered with the CFTC as aDerivatives Clearing Organisation. The Exchange has previously listed binaryoption contracts, principally on forex and commodities. The Exchange ceasedlisting contracts at the end of September. HedgeStreet has liabilities of approximately $1m and currently has operatingcosts of approximately $325,000 per month. It is not currently generating anyrevenue. The Group will provide HedgeStreet with funds to discharge itsliabilities and finance its ongoing operating costs. Commenting on the acquisition Tim Howkins, CEO of IG, said: "For some time we have been interested in entering the US market, but regulatoryconstraints limit our ability to offer much of our existing product range. Theacquisition of HedgeStreet marks an important step in our ongoing process ofresearching and developing as broad a product range as possible that can beoffered to US retail clients. "The acquisition of HedgeStreet gives us the necessary regulatory approvals,technology, intellectual property and most of the staff needed to operate anexchange allowing US retail clients to trade binary options. We intend to makesome modifications to the Exchange, particularly the range of contracts offered,after which we will re-launch it. We are aiming for this re-launch to takeplace around the end of our current financial year. We will continue to developand extend the range of contracts that can be traded on the Exchange in order towiden the appeal of our US offering. We anticipate that the majority of thedevelopment work will be covered by the current operating costs. "While we are developing the Exchange's product offering we also intend toactivate our existing regulated US subsidiary, IG Financial Markets Inc. Thisalready holds the necessary regulatory approvals to offer forex to US retailclients. We anticipate that this will start to trade early in 2008, offering USclients the ability to trade forex using our PureDeal and L2 platforms. In duecourse we plan that IG Financial Markets will also offer its clients contractstraded on the Exchange. "The US is the largest retail forex market in the world and already has a largenumber of providers. However, the regulatory environment is in the process ofbeing tightened, including a significant increase in the capital requirements.It seems likely that this will reduce the number of competitors and that thetime is now ripe for us, as a well-capitalised business with excellenttechnology, to enter this market. The ability to offer contracts traded on theExchange, alongside a conventional over-the-counter forex offering, will, Ibelieve, provide us with a unique proposition for US retail forex traders. "Until now it has been our policy not to accept US retail clients. That will,of course, remain our policy for our betting and contract for differencebusinesses. Our US subsidiaries, HedgeStreet and IG Financial Markets Inc. willtransact with US clients and have the necessary regulatory status to allow themto do so lawfully. "Our acquisition of HedgeStreet represents a further step in our strategy ofgeographic expansion and, after some further development work, will give us theability to offer the US market an innovative range of products. This project islikely to take some time to come fully to fruition, and the extent of itssuccess will depend on how broad a range of contracts we are able to developwithin the constraints of the US regulatory environment." For further information please contact: Financial Dynamics Nick Henderson +44 (0)207 269 7114 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
IG