GFI's biggest shareholder stands with CME

January 27, 2015 01:08 PM
Text of Michael Gooch letter to GFI shareholders

While we are willing to take these significantly reduced sales prices in order for GFI stockholders to maximize the value of their shares, BGC's commitment to a deal remains unclear.  After five-and-a-half months of negotiations with GFI's Special Committee,BGC still has not signed a non-disclosure agreement with the standard no-solicitation, no-poach, and no-hiring conditions necessary to protect GFI from a raid on its employees.  As a result, I believe BGC's hair trigger conditionality is unlikely to be satisfied given its inability to do due diligence without such a customary NDA in place.    

BGC's tender offer remains highly conditional.  Most notably, BGC's offer is conditioned on the current GFI board voluntarily handing over board control to BGC if BGC receives tenders for as little as 45% of GFI's outstanding shares.  That 45% represents less than 41% of the outstanding shares of GFI on a fully diluted basis. By comparison, JPI and other insiders and employees own or are entitled to more than 44% of the fully diluted share count once restricted stock units are factored in. In my opinion, it is not appropriate for BGC to get control of two‑thirds of GFI's board seats in these circumstances. 

BGC's tender offer is also subject to (among other things) an impairment condition that cannot be satisfied without due diligence.  Given BGC's refusal to sign an NDA, it cannot begin due diligence and its impairment condition therefore cannot be satisfied.  In my opinion, this effectively represents a due diligence out from its obligation to close its tender offer.

To be clear, even if 45% of GFI's shares (or more) are tendered to BGC next week, the tender offer is still subject to many other conditions, such as the impairment condition, which will remain unsatisfied.  So even if BGC reaches the 45% tender threshold, there is no assurance or guarantee that you will receive $6.10 for your shares.

Fortunately, GFI stockholders have an extremely compelling alternative to the highly conditional BGC offer: the pending transaction with CME which will benefit ALL GFI stockholders.  By choosing the tax-efficient CME transaction that offers you the right to elect cash and/or CME shares totaling $5.85 per share rather than BGC's hostile, fully taxable conditional tender offer, you will avoid being stuck in limbo for a significant period of time—and possibly indefinitely—while waiting for the material conditions of BGC's tender offer to be satisfied.

I urge you to vote in favor of the CME Merger so that all GFI stockholders can receive the tax-efficient $5.85 per share in merger consideration.  I also urge you not to tender your shares to BGC or vote against the CME Merger.  Doing so is a vote for uncertainty and against your own financial interests.

I thank you for your continued support.

Michael Gooch

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