Securities firm International Assets Holding Corp agreed to buy commodity risk management firm FCStone Group Inc in an all-stock deal valued at about $130 million, as it looks to expand presence in the commodities market.
FCStone's stockholders will get 0.2950 share of International Assets for each share held, valuing FCStone shares at $4.64, based on International Asset Holding stock's closing price of $15.74 on Wednesday.
The deal values FCStone, whose shares have fallen more than 85 percent in the last one year, at a premium of about 12 percent.
Concerns about Kansas City, Missouri-based FCStone had grown earlier in the year after the firm warned of mounting losses tied to a soured energy-trading account. The broker was the clearing firm or counter-party on those accounts.
Loss making FCStone, which arranges and clears energy and commodity trades, had blamed a decline in market transparency and liquidity as contributing to problems assessing losses.
Following the deal, Altamonte Springs-based International Assets' current shareholders will own about 52.5 percent of the company, while FCStone shareholders will hold the rest, International Assets said in a statement.
FCStone will continue to operate independently after the deal, which is expected to close in the fourth quarter.
The combination will create a finacial services firm with an asset base of about $2.3 billion and annual revenues of about $411 million. The combined entity will service more than 10,000 customers, with offices in eleven countries, International Assets said.
Sean O'Connor, currently the chief executive of International Assets, will be CEO of the combined company.
If the deal is terminated, each party may be required to pay the other party a termination fee of $4.9 million and expenses of up to $2 million.
International Assets, which has fueled its growth through acquisitions and was named to the Fortune 500 list, has gained over 80 percent in value since January.
Banc of America Merrill Lynch Securities and Houlihan Lokey served as financial advisors to International Assets, while BMO Capital Markets served as financial advisor to FCStone.
Shares of International Assets were trading down 9.4 percent at $14.25, while those of FCStone were down 3 cents in morning trade on Nasdaq.
(Reporting by Sweta Singh in Bangalore; Editing by Gopakumar Warrier, Dinesh Nair)