TD Ameritrade (AMTD) Updates on Knight Capital (KCG) Stake Following GETCO Bid

December 26, 2012 4:52 PM EST
TD Ameritrade Holding (NYSE: AMTD) updates holding in Knight Capital (NYSE: KCG).

According to an amended 13D with the U.S. SEC, TD disclosed holding 39,000 Series A-1 Shares, representing 26,000,013 shares of common stock on a fully-converted basis, representing 13.1 percent of the Issuer’s total outstanding Common Stock, and assuming full conversion of all the Series A-1 Shares issued pursuant to the Purchase Agreement into shares of Common Stock, approximately 7.3 percent of the Issuer’s total outstanding Common Stock.

TD Ameritrade also detailed some of the specifics of the GETCO acquisition:

On December 19, 2012, the Issuer, GETCO Holding Company, LLC (“GETCO”) and GA-GTCO, LLC (“Blocker”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, among other things, certain mergers will occur (the “Mergers”) and the surviving entities of the Mergers will survive as wholly owned subsidiaries of a corporation to be organized under Delaware law (“Newco”). Newco will be a publicly traded company, with its shares listed on the New York Stock Exchange.

Subject to the terms and conditions of the Merger Agreement, which has been approved by the boards of directors of GETCO and the Issuer, upon the completion of the Mergers (1) each share of Issuer Common Stock will be converted into either (i) 1 share of Newco common stock, with cash to be paid in lieu of fractional shares of Newco common stock or (ii) $3.75 in cash, at the election of the holders of Issuer Common Stock, subject to a cap of 66.7% of the total number of shares of Issuer Common Stock converting in the Mergers that may be paid in cash and (2) the outstanding units of GETCO and Blocker will be converted into the right to receive, in the aggregate, (a) shares of Newco common stock, representing approximately 233 million shares of Newco as of the date of the Merger Agreement and (b) 75 million warrants to purchase shares of Newco common stock. The 75 million warrants will be divided evenly between three classes: 25 million warrants with a $4.00 exercise price and a four-year term; 25 million warrants at a $4.50 exercise price and a five-year term; and 25 million warrants at a $5.00 exercise price and a six-year term.

Consummation of the Mergers is subject to various conditions, including (i) requisite approvals of the holders of certain classes of units of GETCO and Issuer Common Stock and Series A-1 Shares (voting as a single class on an as-converted basis) (as well as a vote of holders of the preferred stock of the Issuer, if required), (ii) receipt of regulatory approvals and (iii) the absence of any law or order prohibiting the closing. In addition, each party’s obligation to consummate the Merger is subject to certain other conditions, including (i) subject to the standards set forth in the Merger Agreement, the accuracy of the representations and warranties of the other parties, (ii) compliance of the other parties with their covenants in all material respects and (iii) the delivery of opinions from counsel to GETCO, Blocker and the Issuer relating to the U.S. federal income tax code treatment of the Mergers.

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