UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
Knight Capital Group, Inc.
(Name of Issuer)
Class A Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
499005106
(CUSIP Number)
Alex Sadowski
Assistant General Counsel
350 N. Orleans, 3rd Floor South
Chicago, IL 60654
+ 1 312 931 2200
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
November 28, 2012
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.
| * | The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. |
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
| CUSIP No. 499005106 |
| (1) |
Names of Reporting Persons.
GETCO Strategic Investments, LLC | |||||
| (2) | Check the Appropriate Box if a Member of a Group (a) ¨ (b) ¨ | |||||
| (3) | SEC Use Only
| |||||
| (4) | Source of Funds
AF | |||||
| (5) | Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) ¨
| |||||
| (6) | Citizenship or Place of Organization
Delaware | |||||
|
Number of Shares Beneficially Owned by Each Reporting Person With |
(7) | Sole Voting Power
0 | ||||
| (8) | Shared Voting Power
56,875,362 (1) | |||||
| (9) | Sole Dispositive Power
0 | |||||
| (10) | Shared Dispositive Power
56,875,362 (1) | |||||
|
(11) |
Aggregate Amount Beneficially Owned by Each Reporting Person
56,875,362 (1) | |||||
| (12) |
Check if the Aggregate Amount in Row (11) Excludes Certain Shares ¨
| |||||
| (13) |
Percent of Class Represented by Amount in Row (11)
23.8% (2) | |||||
| (14) |
Type of Reporting Person
OO | |||||
| (1) | Reflects 56,875,362 shares of Class A Common Stock issuable upon conversion of the Issuer’s Series A-1 Convertible Preferred Stock. |
| (2) | Calculated in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, based on 181,892,665 shares of Class A Common Stock outstanding (excluding shares of Common Stock issuable upon conversion of the Preferred Stock) as of November 5, 2012, as reported in the Issuer’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, as filed with the Securities and Exchange Commission on November 9, 2012. |
2
CUSIP No. 499005106
| (1) |
Names of Reporting Persons.
GETCO Holding Company, LLC | |||||
| (2) | Check the Appropriate Box if a Member of a Group (a) ¨ (b) ¨ | |||||
| (3) | SEC Use Only
| |||||
| (4) | Source of Funds
OO | |||||
| (5) | Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) ¨
| |||||
| (6) | Citizenship or Place of Organization
Delaware | |||||
|
Number of Shares Beneficially Owned by Each Reporting Person With |
(7) | Sole Voting Power
0 | ||||
| (8) | Shared Voting Power
56,876,429 (1) | |||||
| (9) | Sole Dispositive Power
0 | |||||
| (10) | Shared Dispositive Power
56,876,429 (1) | |||||
|
(11) |
Aggregate Amount Beneficially Owned by Each Reporting Person
56,876,429 (1) | |||||
| (12) |
Check if the Aggregate Amount in Row (11) Excludes Certain Shares ¨
| |||||
| (13) |
Percent of Class Represented by Amount in Row (11)
23.8% (2) | |||||
| (14) |
Type of Reporting Person
HC, OO | |||||
| (1) | Reflects 1,067 shares of Class A Common Stock and 56,875,362 shares of Class A Common Stock issuable upon conversion of the Issuer’s Series A-1 Convertible Preferred Stock. |
| (2) | Calculated in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, based on 181,892,665 shares of Class A Common Stock outstanding (excluding shares of Common Stock issuable upon conversion of the Preferred Stock) as of November 5, 2012, as reported in the Issuer’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, as filed with the Securities and Exchange Commission on November 9, 2012. |
3
This Amendment No. 2 amends and supplements Item 4 and Item 7 of the Schedule 13D of GETCO Holding Company, LLC (“Getco Holding”) and GETCO Strategic Investments, LLC (“GSI”) (each a “Reporting Person” and together, the “Reporting Persons”) filed on August 16, 2012 with the Securities and Exchange Commission with respect to the Class A Common Stock, $.01 par value per share (“Common Stock”), of Knight Capital Group, Inc. (the “Issuer”), as amended by Amendment No. 1 filed on November 15, 2012. Unless otherwise indicated, all capitalized terms used but not defined herein have the meanings set forth in the Schedule 13D.
Item 4 of this Schedule 13D is hereby amended and supplemented as follows:
On November 28, 2012, GETCO Holding submitted a letter to the Board of Directors of the Issuer. A copy of the letter is attached to this Amendment No. 2 as Exhibit 99.6 and is hereby incorporated by reference into this Item 4.
Item 7 of this Schedule 13D is hereby amended and supplemented as follows:
Exhibit 99.6 Letter dated November 28, 2012
4
After reasonable inquiry and to the best of my knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct.
Dated: November 28, 2012
| GETCO Holding Company, LLC | ||
| By: | /s/ John McCarthy | |
| Name: John McCarthy | ||
| Title: Authorized Signatory | ||
| GETCO Strategic Investments, LLC | ||
| By: | /s/ John McCarthy | |
| Name: John McCarthy | ||
| Title: Authorized Signatory | ||
5
Exhibit 99.6
[GETCO Letterhead]
November 28, 2012
Board of Directors of Knight Capital Group, Inc.
c/o Thomas M. Joyce
Chairman and Chief Executive Officer
Knight Capital Group, Inc.
545 Washington Boulevard
Jersey City, New Jersey 07310
Dear Members of the Board:
On behalf of GETCO Holding Company, LLC (“GETCO”), I am pleased to submit this proposal for a business combination (“Merger”) between GETCO and Knight Capital Group, Inc. (“Knight”). The specific terms of our proposal described below have been unanimously approved by GETCO’s Board of Directors. I am convinced that this Merger would unlock tremendous value for the shareholders of both firms while establishing a global leader in market-making and agency execution.
As significant as its near-term financial benefits are, this Merger’s long-term strategic rationale is equally compelling. Underpinned by Knight’s customer franchise, GETCO’s industry-leading technology and an unmatched reservoir of talent and capital, the combined company would be a leader in market-making and agency execution across geographies, market structures, and asset classes. The combined company’s scale, footprint, and capability set would be a magnet to customers, talented traders and technologists, which is especially important in an environment of lower trading volumes and higher regulatory engagement.
The proposed Merger values Knight’s common shares at a price of $3.50 per share — a 41% premium to the closing price on November 23, 2012, the last day before rumors of possible offers for Knight were published in the press, and a 7.4% premium to tangible book value. The proposal is structured to allow Knight’s shareholders to receive a significant cash payment while being able to retain a meaningful equity stake to share in the upside of the publicly-traded, combined company.
The Merger would be accomplished through a two-step process that is designed to provide maximum flexibility for your shareholders. The first step would be a Knight holding company reorganization / GETCO merger with GETCO shareholders receiving approximately 242 million newly issued shares
of Knight and warrants to purchase Knight common stock as follows: 23 million ($4 strike price, 4 year expiration), 23 million ($4.50 strike price, 5 year expiration), and 23 million ($5 strike price, 6 year expiration). Based on September 30, 2012 financials, Knight’s tangible book value would accrete to $3.50 per share pro-forma for the Merger. As a result of this first step, the 57 million shares of Knight currently owned by GETCO would be retired.
The second step would be an issuer tender offer for up to 154 million shares of Knight (representing 50% of the outstanding shares of Knight not currently owned by GETCO) at a cash price of $3.50 per share (total consideration of approximately $539 million). The tender offer would launch before the closing of the Merger and would be contingent upon, and close immediately after, the Merger closing. GETCO and its former owners would not participate in the tender offer.
The optionality embedded in the tender structure means that to the extent some Knight shareholders decide to keep more than 50% of their shares, those Knight shareholders that have a higher preference for cash would be able to tender more than 50% of their shares. As such, we believe this two-step structure is an efficient and highly executable way to accomplish the financial goals of our proposal, but we would be open to discussing other transaction structures that achieve the same outcome.
After completion of the Merger, assuming full participation in the tender offer, no shareholder would individually own more than 20% of the combined company and most large shareholders would be under 10% ownership.
In order to provide deal certainty, we have lined up $950 million of fully-committed financing from a large financial institution. This includes the financing necessary to consummate the Merger and, in order to better position the combined company, the financing necessary to refinance all of GETCO’s and Knight’s outstanding debt. The financing will be on customary and market terms for financings of this type.
I will be the chief executive officer and a Board member of the combined company and Tom Joyce will be non-executive Chairman of the Board. In addition, the Board will include four directors nominated by former GETCO shareholders and three directors currently serving on the Knight Board of Directors. We place a high value on Knight employees and would work to ensure significant retention of them.
In addition to creating an industry leader in market making and agency execution that is well positioned across multiple product lines globally, the work completed by our respective management teams to date indicates that there are large and achievable cost and revenue synergies attainable through a Merger. The integration of our firms’ operations would generate substantial earnings accretion going forward. Moreover, the larger capital base and higher regulatory capital of the combined company would provide strong support for existing customer operations as well as an attractive currency for potential future acquisitions.
We believe this Merger offers Knight’s shareholders a clear path to reaping the benefits of this unique opportunity, and would be very attractive to both our shareholder bases. In addition, by structuring the transaction with both cash and equity components, Knight shareholders are able to realize an immediate return on investment, as well as preserve the opportunity to participate in the future growth of the combined company.
This proposal is subject to standard conditions of a transaction of this nature, including, but not limited to, completion of our due diligence and the satisfactory negotiation and execution of a definitive agreement.
GETCO is prepared to move expeditiously to complete the due diligence process and finalize the terms of a definitive agreement. We believe that we could enter into such an agreement by no later than December 3, 2012 and we propose that the parties enter into an exclusivity agreement for that period.
We and our advisors are available to address any questions you have on this proposal. In addition, I would welcome the opportunity to present this proposal directly to you and answer any questions you may have. You can reach me at xxx-xxx-xxxx.
Very truly yours,
/s/ Daniel Coleman
Daniel Coleman
Chief Executive Officer
GETCO Holding Company, LLC
cc:
Len Amoruso
(Knight Capital Group)