Knight Capital (KCG) Nears a Sale

November 26, 2012 8:31 AM EST
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Knight Capital Group (NYSE: KCG) may have found its white knight, according to reports over the weekend.

The firm which is still reeling from the $440 million pre-tax loss related to an August 1st trading glitch, is in talks to sell its massive market-making unit. Chicago-based Getco LLC and New York-based Virtu Financial LLC are among the likely bidders, according to the Wall Street Journal.

Knight Capital's CEO Thomas Joyce is downplaying the talk. In an e-mail to employees this weekend Joyce said the company's capital levels are strong and no deal will be done unless it is in the best interest of the company.

Following the August trading glitch, several firms including Getco saved Knight from bankruptcy with a $400 million lifeline. The investors, which also include Blackstone Group and TD Ameritrade, control preferred stock that is convertible into approximately 70 percent of Knight.

Evercore Partners analyst Chris Allen said the company may be worth $3.09/share in a deal. Allen sees the market making business worth $750 mllion based on 9x multiple on 2013 its EPS estimates, the electronic execution business may be worth $350 million and the institutional business has no value, he said.

Shares of Knight are up 10 percent to $2.73 in pre-open trading Monday on the reports.

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