(4) Divestitures and Acquisitions

Formation of Derivatives Venture

In September 2017, the Company signed a definitive agreement with Option Technology Solutions LLC (“OpTech”) to form Matrix Holdings Group (“Matrix”), a newly established derivatives execution and technology business focused on sell-side clients, professional traders and select hedge funds. The transaction closed and the venture launched in February 2018 following the receipt of required regulatory approvals and satisfaction of other customary closing conditions (see Note 24, Subsequent Events).

At closing, the Company contributed the ITG Derivatives entity, including its broker-dealer license and professional trader client base with revenues of $5.3 million during the year ended December 31, 2017, along with certain derivatives-focused software and technology for an initial minority stake of approximately 20%. OpTech contributed the management team, a retail-focused trading and analytics platform and capital.

During the year ended December 31, 2017, the Company deemed the remaining value of a customer intangible asset recorded in ITG Derivatives of $0.3 million fully impaired and incurred legal fees related to the establishment of the Matrix derivatives venture of $0.8 million.

The Company determined that the contribution of ITG Derivatives did not meet the requirements to be treated as a discontinued operation. As such, the results of ITG Derivatives through the closing date of the venture will be included in continued operations on the Consolidated Statements of Operations in the U.S. Operations segment.

ITG Investment Research, LLC

On May 27, 2016, the Company completed the sale of ITG Investment Research, LLC (“Investment Research”), a wholly owned subsidiary of the Company, to a wholly owned subsidiary of Leucadia National Corporation for $12 million in cash consideration.

Upon completion of the sale, the Company recorded a pre-tax gain of approximately $21,000 and an after-tax gain of approximately $50,000. The pre-tax gain is recorded in other revenue on the Consolidated Statements of Operations as of December 31, 2016. The pre-tax gain is net of direct costs to sell Investment Research, including professional fees, cash compensation and the acceleration of previously issued restricted stock unit awards.

The following table summarizes the components of the pre-tax gain (dollars in thousands):


Cash proceeds from sale	$	12,000
Carrying value of net assets disposed		(7,502)
Direct selling costs		(4,477)
Pre-tax gain on sale	$	21

As a result of this divestiture, the Company reduced the headcount within its U.S. single stock sales trading operation. For more information, see Note 5, Restructuring Charges.

The Company determined that the sale of Investment Research did not meet the requirements to be treated as a discontinued operation. As such, the results of Investment Research through the sale completion date of May 27, 2016 are included in continued operations on the Consolidated Statements of Operations, primarily in the U.S. Operations segment.

Energy Research Operations

On December 22, 2015, the Company completed the sale of the subsidiaries conducting its energy research operations to an affiliate of Warburg Pincus (“Buyer”), pursuant to an agreement dated November 5, 2015. Upon closing of the sale, the Buyer paid the Company $120.5 million in cash consideration. As part of this transaction, the Company agreed to distribute energy research to its institutional clients, serving as the exclusive sales partner for institutional investors for at least two years. Per an amendment, this distribution agreement was terminated as of December 31, 2016.

The Company recorded a pre-tax gain upon completion of the sale of $107.7 million and an after-tax gain of $91.4 million. The pre-tax gain is recorded in other revenue on the Consolidated Statements of Operations for the year ended December 31, 2015. The pre-tax gain is net of a working capital adjustment on the closing balance sheet and direct costs to sell the energy research business, including professional fees, cash compensation, the acceleration of previously-issued deferred stock awards and $0.2 million of currency translation losses reclassified to the results of operations.

The following table summarizes the components of the pre-tax gain (dollars in thousands):


Cash proceeds from sale	$	120,500
Working capital adjustment		(1,615)
Carrying value of net assets disposed		(3,025)
Direct selling costs		(8,161)
Pre-tax gain on sale	$	107,699

The Company determined that the sale of the energy research operations did not meet the requirements to be treated as a discontinued operation. As such, the results of the energy research operations through the sale date of December 22, 2015 are included in continued operations on the Consolidated Statements of Operations, primarily in the U.S. Operations segment.