Item 8.01 Other Events.
On
Legal Proceedings
As described in greater detail in the Litigation Relating to the Merger section
of the Proxy Statement, purported stockholders of GAIN filed six actions in the
GAIN believes that the claims asserted in the Merger Litigation are without merit and no supplemental disclosure is required under applicable law. However, in order to avoid the risk of adverse effect or delay in connection with the Merger Litigation and to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, GAIN has determined to voluntarily supplement the Proxy Statement as described in this Current Report on Form 8-K to address claims asserted in the Merger Litigation, and plaintiffs in the Merger Litigation have agreed to voluntarily dismiss their lawsuits in light of this supplemental disclosure. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, GAIN specifically denies all allegations in the Merger Litigation that any additional disclosure was or is required.
Supplemental Disclosures
The additional disclosures in this Current Report on Form 8-K supplement the disclosures contained in, and should be read in conjunction with, the Proxy Statement, which should be read in its entirety. To the extent that information in this Current Report on Form 8-K differs from or updates information contained in the Proxy Statement, the information in this Current Report on Form 8-K shall supersede or supplement the information in the Proxy Statement. Capitalized terms used, but not otherwise defined herein, shall have the meanings ascribed to such terms in the Proxy Statement. The additional disclosures in these supplemental disclosures are underlined for convenience.
The disclosure under the heading "GAIN's Reasons for the Merger" on page 38 of the Proxy Statement is hereby supplemented by adding the following immediately after the fifth bullet thereon:
? the fact that none of the previously contacted counterparties were restricted from making proposals to the GAIN board, including that all eight of the mutual confidentiality agreements described above contained provisions that, following the signing of the merger agreement, permit such counterparty to make confidential proposals to the GAIN board.
The disclosure under the heading "Opinion of GAIN's Financial Advisor-Selected Public Company Analysis" on page 46 of the Proxy Statement is hereby supplemented by amending and restating the third full paragraph on page 46 (including the bullets contained therein) to read as follows:
Based on public and other available information as of
P/E ratio CY2018A CY2019E CY2020E CY2021E CMC Markets PLC(1) nm* 11.4x 18.5x 14.5x
IG Group Holdings PLC(2) 12.3x 17.2x 17.2x 14.2x Interactive Brokers Group, Inc. 36.1x 34.2x 29.1x 26.3x Plus500 Ltd.
3.2x 8.0x 8.0x 7.4x Swissquote Group Holding Ltd. 20.6x 22.1x 19.8x 16.8x
*nm indicates P/E ratio was not meaningful as it was either less than 0.0x or more than 60.0x
(1) CMC Markets PLC's fiscal year end is
year-end figures are those from the subsequent fiscal year-end (e.g., 2018 calendar year-end figures are 2019 fiscal year-end figures).
(2) IG Group Holdings PLC's fiscal year-end is
are calendarized.
The disclosure under the heading "Opinion of GAIN's Financial Advisor-Selected Transactions Analysis" on page 47 of the Proxy Statement is hereby supplemented by amending and restating the third full paragraph on page 47 (including the table contained therein) to read as follows:
The transactions analyzed, together with their respective announcement dates, are listed below ($ in millions):
Date Announced Acquirer Target Enterprise Value Revenue Multiples 4/25/2013 GAIN Capital Global Futures & Forex,$108 1.1x Holdings, Inc. Ltd. 10/31/2014 GAIN Capital City Index (Holdings)$148 1.2x Holdings, Inc. Limited 3/25/2015(1) Rakuten FXCM Japan Securities$62 3.1x Securities, Co., Ltd. Inc. 4/1/2015(2) Playtech PLC TradeFX Limited$493 5.6x 8/23/2017(3) Playtech PLC ACM Group Limited (a/k/a$150 5.2x Alpha)
(1) Based on Pro Forma Adjustments disclosed by
(2) Based on sum of upfront cash consideration of €208MM and contingent
consideration cap of €250MM. Total consideration converted to USD based on
conversion rate of
(3) Based on total consideration cap of $150MM. Transaction structured as upfront payment of $5MM, two staged payments based on 1.0x EBITDA of 2017 and 2018; and contingent consideration based on 5.2x the 2019 EBITDA, minus the initial payment and 2017 and 2018 payments.
The disclosure under the heading "Opinion of GAIN's Financial Advisor-Discounted Cash Flow Analysis" on page 48 of the Proxy Statement is hereby supplemented by amending and restating the first paragraph on page 48 to read as follows:
Advisors considered publicly available data, including FactSet, CapitalIQ
financial databases and Duff & Phelps data published on Duff & Phelps's website
and in Duff & Phelps's 2017 Valuation Handbook-Guide to Cost of Capital, when
analyzing the range of discount rates for the unlevered free cash flows of GAIN,
including: (i) a
The disclosure under the heading "Projected Financial Information" on page 51 of the Proxy Statement is hereby supplemented by amending and restating the final three paragraphs (including the tables contained therein) to read as follows:
The following is a summary of the
Fiscal Year End 2019E 2020E 2021E 2022E 2023E Total Revenue$277.5 $366.5 $421.0 $460.5 $489.5 Total Operating Expenses ($259.5 ) ($277.1 ) ($283.7 ) ($291.4 ) ($299.3 ) EBITDA$18.0 $89.4 $137.3 $169.1 $190.2 Depreciation and Amortization ($27.0 ) ($22.7 ) ($21.9 ) ($18.9 ) ($17.7 )
Interest Expense on Long Term Borrowings (
($22.6 )$56.4 $105.8 $144.0 $172.5 Income Tax Benefit/(Expense)$4.0 ($15.8 ) ($29.6 ) ($40.3 ) ($48.3 ) Net Income ($18.6 )$40.6 $76.2 $103.7 $124.2 Average Share Count (millions) 35.9 34.1 32.6 31.3 29.9 Earnings Per Share ($0.52 )$1.19 $2.33 $3.31 $4.15
The following is a summary of the
Fiscal Year End 2019E 2020E 2021E 2022E 2023E Total Revenue$262.6 $362.0 $417.6 $456.0 $485.4 Total Operating Expenses ($254.6 ) ($273.9 ) ($277.9 ) ($285.7 ) ($293.5 ) EBITDA$8.0 $88.1 $139.7 $170.3 $191.9 Depreciation and Amortization ($27.0 ) ($22.8 ) ($22.1 ) ($19.0 ) ($17.9 )
Interest Expense on Long Term Borrowings (
($32.5 )$55.0 $108.1 $145.1 $174.0 Income Tax Benefit/(Expense)$4.0 ($14.3 ) ($28.1 ) ($37.7 ) ($45.2 ) Net Income ($28.5 )$40.7 $80.0 $107.4 $128.8 Average Share Count (millions) 37.3 36.1 34.7 33.4 32.0 Earnings Per Share ($0.76 )$1.13 $2.31 $3.22 $4.03
The following is a summary of the
Fiscal Year End 2020E 2021E Total Revenue$264 $286 Total Operating Expenses ($227 ) ($224 ) EBITDA$37 $62 Depreciation and Amortization ($23 ) ($22 ) EBIT$14 $40 Depreciation and Amortization$23 $22 Change in Net Working Capital$13 $11 Capital Expenditure ($14 ) ($13 ) Cash Taxes ($4 ) ($11 ) Unlevered Free Cash Flow(1)$32 $49 EBIT$14 $40
Interest Expense on Long Term Borrowings (
$4 $30 Income Tax Expense ($1 ) ($8 ) Net income$3 $22 Average Share Count (millions) 37.5 34.9 Earnings Per Share$0.07 $0.63 ________________
(1) Unlevered Free Cash Flow is earnings before interest and taxes, less cash tax
expense, less capital expenditures, plus depreciation and amortization, less changes in net working capital. Unlevered Free Cash Flow was calculated byGCA Advisors and approved by GAIN management to be part of theJanuary 2020 Projections for use inGCA Advisors' financial analyses in connection with rendering its opinion to the GAIN board of directors. Non-cash compensation based expense is treated as a cash expense. Forward-Looking Statements
In addition to historical information, this communication contains
"forward-looking" statements including, but not limited to, GAIN management's
expectations for the future. All statements other than statements of historical
or current fact included in this communication that address activities, events,
conditions or developments that we expect, believe or anticipate will or may
occur in the future are forward-looking statements. A variety of important
factors could cause results to differ materially from such statements. These
factors are noted throughout GAIN's annual report on Form 10-K for the year
ended
Additional Information and Where to Find it
On
Participants in Solicitation
GAIN and its directors and certain of its executive officers may be considered
participants in the solicitation of proxies from GAIN's stockholders in
connection with the proposed transaction. Information about the directors and
executive officers of GAIN is set forth in its Annual Report on Form 10-K for
the year ended
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