IG Group acquired an 87.5% stake in Japanese Retail Forex Dealer FXOnline for $207 million. IG will also be granted an option to acquire the reminder of the firm in due course. FXOnline founder James Gow who owns the remaining 12.5% will stay on as CEO, while former investors FinTech Global Inc. and Mizuho Capital Co. have divested their holdings. This is the second major deal for James who sold 49.9% of the company to FinTech and Mizuho in early 2007 for around $100 million.
FXOnline has shown impressive growth over the past few years. The company reported revenue of $65.9 million for the year ending in March 2008 with pretax profits of $46.15 million. The 45 person firm boasts a 4% market share of the Japanese retail FX market, has a customer base in excess of 30,000 clients and processes 1 million transactions per month valued at close to $60 billion.
The street has long been searching for a suitor for FXOnline. Several investors had been considering a double play by bringing the Japanese broker into a partnership with a western FX firm in order to take advantage of the efficiencies offered by matching U.S. and European retail flow with Japanese retail flow. The company’s aggressive growth and western management also made them an excellent fit for western accusation.
With the deal’s completion, clients will be transfered from FXOnline’s current trading platform onto IG’s PureDeal platform. The move will not only generate additional cost savings but will also allow FXOnline to abandon its relatively weak technology offering based on software provided by FinaTek Services.