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Currenex and the re-rating of FX platforms

I like making the odd prediction and I reckon that it’s just a matter of time before others with bigger brains and deeper pockets than me decide Icap’s parts are worth more than their current sum.

More on Currenex

Currenex and the re-rating of FX platforms

Although there were a few audible gasps in the FX market when it was revealed that State Street was buying Currenex for $564 million, the deal doesn’t look too rich with a little bit of hindsight. State Street has paid about 22 times forecast 2007 earnings, which hardly seems excessive but which no doubt will please Currenex’s biggest shareholder, TH Lee Putnam Ventures.  It will also bring cheer to investors in other trading venues, who might have been briefly worried about their stakes following the sale of HotspotFX and EBS last year.

The deal will force a re-rating of FX platforms and has highlighted just how cheaply both Hotspot and EBS were sold. Knight Financial bought Hotspot, which had made pre-tax profits in 2005 of about $9 million, for just $77.5 million. Why its owners decided to ditch it in such haste and on such a low multiple is not clear. We can all deal backwards, but it looks as if legendary speculator Joe Lewis, Hotspot’s main investor, got that one wrong.

The reasons why EBS went for a bargain price of about $825 million to Icap is more clear cut; I have already contacted several of its former board members and told them I’m going to report them for failing in their fiduciary duties for flogging the company so cheaply.

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