Item 8.01 Other Events.
On May 1, 2020, GAIN Capital Holdings, Inc.,
a Delaware corporation (“GAIN”) filed with the U.S. Securities and Exchange Commission (the “SEC”) GAIN’s
definitive proxy statement on Schedule 14A (the “Proxy Statement”) in connection with the previously announced Agreement
and Plan of Merger, dated as of February 26, 2020 (the “Merger Agreement”) with INTL FCStone Inc., a Delaware corporation
(“INTL”) and Golf Merger Sub I Inc., a Delaware corporation and wholly owned subsidiary of INTL (“Merger Sub”).
Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into GAIN, with GAIN surviving the merger as a wholly
owned subsidiary of INTL (the “Merger”).
Legal Proceedings
As described in greater detail in the Litigation
Relating to the Merger section of the Proxy Statement, purported stockholders of GAIN filed six actions in the United States District
Court for the District of New Jersey, the United States District Court for the District of Delaware and the United States District
Court of the Southern District of New York, captioned Stein v. GAIN Capital Holdings, Inc., et al., Case No. 3:20-cv-04073
(D.N.J.), Franchi v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-00519 (D. Del.), Sperli v. GAIN Capital Holdings,
Inc., et al., Case No. 1:20-cv-03187 (S.D.N.Y.), Sanderson v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-03228
(S.D.N.Y.), Raul v. GAIN Capital Holdings, Inc., et al., Case No. 1:20-cv-03211 (S.D.N.Y.) and Ye He v. GAIN Capital
Holdings, Inc., et al., Case No. 2:20-cv-05026 (D.N.J.), respectively (collectively, the “Merger Litigation”) related
to the Merger Agreement and the Proxy Statement.
GAIN believes that the claims asserted in
the Merger Litigation are without merit and no supplemental disclosure is required under applicable law. However, in order to avoid
the risk of adverse effect or delay in connection with the Merger Litigation and to minimize the costs, risks and uncertainties
inherent in litigation, and without admitting any liability or wrongdoing, GAIN has determined to voluntarily supplement the Proxy
Statement as described in this Current Report on Form 8-K to address claims asserted in the Merger Litigation, and plaintiffs in
the Merger Litigation have agreed to voluntarily dismiss their lawsuits in light of this supplemental disclosure. Nothing in this
Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the
disclosures set forth herein. To the contrary, GAIN specifically denies all allegations in the Merger Litigation that any additional
disclosure was or is required.
Supplemental Disclosures
The additional disclosures in this Current
Report on Form 8-K supplement the disclosures contained in, and should be read in conjunction with, the Proxy Statement, which
should be read in its entirety. To the extent that information in this Current Report on Form 8-K differs from or updates information
contained in the Proxy Statement, the information in this Current Report on Form 8-K shall supersede or supplement the information
in the Proxy Statement. Capitalized terms used, but not otherwise defined herein, shall have the meanings ascribed to such terms
in the Proxy Statement. The additional disclosures in these supplemental disclosures are underlined for convenience.
The disclosure under the heading “GAIN’s Reasons
for the Merger” on page 38 of the Proxy Statement is hereby supplemented by adding the following immediately after the fifth
bullet thereon:
● the fact that none of the previously contacted
counterparties were restricted from making proposals to the GAIN board, including that all eight of the mutual confidentiality
agreements described above contained provisions that, following the signing of the merger agreement, permit such counterparty to
make confidential proposals to the GAIN board.
The disclosure under the heading “Opinion of GAIN’s
Financial Advisor—Selected Public Company Analysis” on page 46 of the Proxy Statement is hereby supplemented by amending
and restating the third full paragraph on page 46 (including the bullets contained therein) to read as follows:
Based on public and other available information
as of February 21, 2020, GCA Advisors calculated (to the extent relevant financial data was available) the company’s then-current
stock price as a multiple of Wall Street research analyst earning consensus estimated earnings per share (such ratio, the “P/E
ratio”) for calendar year 2018 and for estimated calendar years 2019, 2020 and 2021, for each of the selected public companies
set forth below (the “selected companies”). GCA Advisors utilized Wall Street analyst research, CapitalIQ and certain
publicly available financial statements and press releases to analyze the relevant metrics. GCA Advisors believes, based on it
judgement, that the selected companies have similar operating or financial performance characteristics to those of GAIN, but noted
that none of these companies have the same management, composition, industry, size or operations as GAIN. While the selected company
analysis compared GAIN to the selected companies, GCA Advisors did not include every company that could be deemed to be a participant
in this same industry or in the specific sectors of this industry, in which GAIN or any of the selected companies operates.
|
P/E
ratio
|
|
CY2018A
|
|
|
CY2019E
|
|
|
CY2020E
|
|
|
CY2021E
|
CMC Markets PLC(1)
|
nm*
|
|
|
11.4x
|
|
|
18.5x
|
|
|
14.5x
|
IG Group Holdings
PLC(2)
|
12.3x
|
|
|
17.2x
|
|
|
17.2x
|
|
|
14.2x
|
Interactive Brokers
Group, Inc.
|
36.1x
|
|
|
34.2x
|
|
|
29.1x
|
|
|
26.3x
|
Plus500 Ltd.
|
3.2x
|
|
|
8.0x
|
|
|
8.0x
|
|
|
7.4x
|
Swissquote
Group Holding Ltd.
|
20.6x
|
|
|
22.1x
|
|
|
19.8x
|
|
|
16.8x
|
*nm indicates P/E ratio was not meaningful as it was either
less than 0.0x or more than 60.0x
|
(1)
|
CMC
Markets PLC’s fiscal year end is March 31, and as a result, calendar year-end figures are those from the subsequent fiscal
year-end (e.g., 2018 calendar year-end figures are 2019 fiscal year-end figures).
|
|
(2)
|
IG
Group Holdings PLC’s fiscal year-end is May 31; Calendar year-end figures are calendarized.
|
The disclosure under the heading “Opinion of GAIN’s
Financial Advisor—Selected Transactions Analysis” on page 47 of the Proxy Statement is hereby supplemented by amending
and restating the third full paragraph on page 47 (including the table contained therein) to read as follows:
The
transactions analyzed, together with their respective announcement dates, are listed below ($ in millions):
Date
Announced
|
Acquirer
|
Target
|
|
|
Enterprise Value
|
Revenue Multiples
|
4/25/2013
|
GAIN Capital Holdings, Inc.
|
Global Futures & Forex, Ltd.
|
$108
|
1.1x
|
10/31/2014
|
GAIN Capital Holdings, Inc.
|
City Index (Holdings) Limited
|
$148
|
1.2x
|
3/25/2015(1)
|
Rakuten Securities, Inc.
|
FXCM Japan Securities Co., Ltd.
|
$62
|
3.1x
|
4/1/2015(2)
|
Playtech PLC
|
TradeFX Limited
|
$493
|
5.6x
|
8/23/2017(3)
|
Playtech PLC
|
ACM Group Limited (a/k/a Alpha)
|
$150
|
5.2x
|
(1) Based on Pro Forma
Adjustments disclosed by FXCM Inc. that are directly attributable to the transaction, factually supportable and expected to have
a continuing impact on FXCM Inc.’s operating results.
(2) Based on sum of
upfront cash consideration of €208MM and contingent consideration cap of €250MM. Total consideration converted to USD
based on conversion rate of 1.0771 USD to EUR at announcement.
(3) Based on total
consideration cap of $150MM. Transaction structured as upfront payment of $5MM, two staged payments based on 1.0x EBITDA of 2017
and 2018; and contingent consideration based on 5.2x the 2019 EBITDA, minus the initial payment and 2017 and 2018 payments.
The disclosure under the heading “Opinion of GAIN’s
Financial Advisor—Discounted Cash Flow Analysis” on page 48 of the Proxy Statement is hereby supplemented by amending
and restating the first paragraph on page 48 to read as follows:
GCA Advisors used the financial projections
of GAIN for fiscal years 2020 and 2021 contained in the January 2020 Projections (as described below under “The Merger (Proposal
1)-Certain Financial Projections”), in each case as prepared by GAIN’s management to perform a discounted cash flow
analysis, based on unlevered free cash flow in the January 2020 Projections as described in the section entitled “Projected
Financial Information” below (the “projections”). In conducting this analysis, GAIN management has not provided,
and GCA Advisors has not relied on, any financial forecast beyond the calendar year 2021 due to the volatile nature of GAIN’s
business per GAIN management, and GCA Advisors otherwise assumed that GAIN would perform in accordance with the projections provided
by management. GCA Advisors estimated GAIN’s perpetual unlevered free cash flows by applying terminal growth rates of (1.0%)
to 1.0%, which terminal growth rates were derived based on GCA Advisors comparative analysis and its judgment, taking
into account GAIN’s business, its financial performance and industry in which GAIN operates. GCA Advisors then discounted
the unlevered free cash flows projected through fiscal year 2021 and the perpetual unlevered free cash flows to present values
using discount rates ranging from 12.9% to 14.9%. GCA
Advisors considered publicly available data, including FactSet,
CapitalIQ financial databases and Duff & Phelps data published on Duff & Phelps’s website and in Duff & Phelps’s
2017 Valuation Handbook-Guide to Cost of Capital, when analyzing the range of discount rates for the unlevered free cash
flows of GAIN, including: (i) a U.S. risk-free rate of 2.9%, based on trailing 10-year average 20-year treasury yield, (ii) a beta
estimate of 0.6 to 1.7, measured over a 52-week period, (iii) an equity market risk premium of 6.9% and (iv) a size premium of
5.6%. This method of analysis, varying the discount rate from 12.9% to 14.9% and the terminal growth rate from (1.0%) to 1.0%,
indicated a range of implied per share values of $5.06 to $6.83. In addition, this method of analysis, when holding the discount
rate constant at the midpoint of 13.9% and varying the terminal growth rate from (1.0%) to 1.0%, indicated a range of implied per
share values of $5.46 to $6.23, based on the FD shares. GCA Advisors then compared this range of per share values for the common
stock implied by the discounted cash flow analysis to the $6.00 per share merger consideration.
The disclosure under the heading “Projected Financial
Information” on page 51 of the Proxy Statement is hereby supplemented by amending and restating the final three paragraphs
(including the tables contained therein) to read as follows:
The following is a summary of the June 2019
Projections (dollars in millions, except for Average Share Count and Earnings Per Share):
|
Fiscal Year End
|
|
2019E
|
|
2020E
|
|
2021E
|
|
2022E
|
|
2023E
|
Total Revenue
|
$277.5
|
|
$366.5
|
|
$421.0
|
|
$460.5
|
|
$489.5
|
Total Operating Expenses
|
($259.5)
|
|
($277.1)
|
|
($283.7)
|
|
($291.4)
|
|
($299.3)
|
EBITDA
|
$18.0
|
|
$89.4
|
|
$137.3
|
|
$169.1
|
|
$190.2
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
($27.0)
|
|
($22.7)
|
|
($21.9)
|
|
($18.9)
|
|
($17.7)
|
Interest Expense on Long Term Borrowings
|
($13.6)
|
|
($10.3)
|
|
($9.6)
|
|
($6.2)
|
|
$0.0
|
Pre-Tax Income
|
($22.6)
|
|
$56.4
|
|
$105.8
|
|
$144.0
|
|
$172.5
|
Income Tax Benefit/(Expense)
|
$4.0
|
|
($15.8)
|
|
($29.6)
|
|
($40.3)
|
|
($48.3)
|
Net Income
|
($18.6)
|
|
$40.6
|
|
$76.2
|
|
$103.7
|
|
$124.2
|
|
|
|
|
|
|
|
|
|
|
Average Share Count (millions)
|
35.9
|
|
34.1
|
|
32.6
|
|
31.3
|
|
29.9
|
Earnings Per Share
|
($0.52)
|
|
$1.19
|
|
$2.33
|
|
$3.31
|
|
$4.15
|
The following is a summary of the September
2019 Projections (dollars in millions, except for Average Share Count and Earnings Per Share):
|
Fiscal Year End
|
|
2019E
|
|
2020E
|
|
2021E
|
|
2022E
|
|
2023E
|
Total Revenue
|
$262.6
|
|
$362.0
|
|
$417.6
|
|
$456.0
|
|
$485.4
|
Total Operating Expenses
|
($254.6)
|
|
($273.9)
|
|
($277.9)
|
|
($285.7)
|
|
($293.5)
|
EBITDA
|
$8.0
|
|
$88.1
|
|
$139.7
|
|
$170.3
|
|
$191.9
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
($27.0)
|
|
($22.8)
|
|
($22.1)
|
|
($19.0)
|
|
($17.9)
|
Interest Expense on Long Term Borrowings
|
($13.5)
|
|
($10.3)
|
|
($9.5)
|
|
($6.2)
|
|
$0.0
|
Pre-Tax Income
|
($32.5)
|
|
$55.0
|
|
$108.1
|
|
$145.1
|
|
$174.0
|
Income Tax Benefit/(Expense)
|
$4.0
|
|
($14.3)
|
|
($28.1)
|
|
($37.7)
|
|
($45.2)
|
Net Income
|
($28.5)
|
|
$40.7
|
|
$80.0
|
|
$107.4
|
|
$128.8
|
|
|
|
|
|
|
|
|
|
|
Average Share Count (millions)
|
37.3
|
|
36.1
|
|
34.7
|
|
33.4
|
|
32.0
|
Earnings Per Share
|
($0.76)
|
|
$1.13
|
|
$2.31
|
|
$3.22
|
|
$4.03
|
The following is a summary of the January
2020 Projections (dollars in millions, except for Average Share Count and Earnings Per Share):
|
|
Fiscal Year End
|
|
|
2020E
|
|
2021E
|
|
|
|
Total Revenue
|
|
$264
|
|
$286
|
Total Operating Expenses
|
|
($227)
|
|
($224)
|
EBITDA
|
|
$37
|
|
$62
|
|
|
|
|
|
Depreciation and Amortization
|
|
($23)
|
|
($22)
|
EBIT
|
|
$14
|
|
$40
|
Depreciation and Amortization
|
|
$23
|
|
$22
|
Change in Net Working Capital
|
|
$13
|
|
$11
|
Capital Expenditure
|
|
($14)
|
|
($13)
|
Cash Taxes
|
|
($4)
|
|
($11)
|
Unlevered Free Cash Flow(1)
|
|
$32
|
|
$49
|
|
|
|
|
|
EBIT
|
|
$14
|
|
$40
|
Interest Expense on Long Term Borrowings
|
|
($10)
|
|
($10)
|
Pre-Tax Income
|
|
$4
|
|
$30
|
Income Tax Expense
|
|
($1)
|
|
($8)
|
Net income
|
|
$3
|
|
$22
|
|
|
|
|
|
Average Share Count (millions)
|
|
37.5
|
|
34.9
|
Earnings Per Share
|
|
$0.07
|
|
$0.63
|
________________
|
(1)
|
Unlevered Free Cash Flow is earnings before interest and taxes, less cash tax expense, less capital expenditures, plus depreciation
and amortization, less changes in net working capital. Unlevered Free Cash Flow was calculated by GCA Advisors and approved by
GAIN management to be part of the January 2020 Projections for use in GCA Advisors’ financial analyses in connection with
rendering its opinion to the GAIN board of directors. Non-cash compensation based expense is treated as a cash expense.
|
Forward-Looking Statements
In addition to historical information,
this communication contains "forward-looking" statements including, but not limited to, GAIN management's expectations
for the future. All statements other than statements of historical or current fact included in this communication that address
activities, events, conditions or developments that we expect, believe or anticipate will or may occur in the future are forward-looking
statements. A variety of important factors could cause results to differ materially from such statements. These factors are noted
throughout GAIN's annual report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 16, 2020, and
include, but are not limited to, the actions of both current and potential new competitors, fluctuations in market trading volumes,
financial market volatility, evolving industry regulations, errors or malfunctions in GAIN’s systems or technology, rapid
changes in technology, effects of inflation, customer trading patterns, the success of our products and service offerings, our
ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully
integrate assets and companies we have acquired, our ability to effectively compete, changes in tax policy or accounting rules,
fluctuations in foreign exchange rates and commodity prices, adverse changes or volatility in interest rates, the risk that our
stockholders may not adopt the Merger Agreement, the risk that the necessary regulatory approvals may not be obtained or may be
obtained subject to conditions that are not anticipated, risks that any of the closing conditions to the proposed Merger may not
be satisfied in a timely manner, as well as general economic, business, credit and financial market conditions, internationally
or nationally, and our ability to continue paying a quarterly dividend in light of future financial performance and financing
needs. The forward-looking statements included herein represent GAIN’s views as of the date of this communication. GAIN
undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.
Additional Information and Where to Find it
On May 1, 2020, GAIN filed the definitive
proxy statement on Schedule 14A with the SEC. Additionally, GAIN plans to file other relevant materials with the SEC in connection
with the proposed transaction. This material is not a substitute for the definitive proxy statement or any other document which
GAIN may file with the SEC. The definitive proxy statement has been sent or given to the stockholders of GAIN and contains important
information about the proposed transaction and related matters. INVESTORS IN AND SECURITY HOLDERS OF GAIN ARE URGED TO READ THE
DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR FURNISHED OR WILL BE FILED OR WILL BE FURNISHED WITH
THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BEFORE MAKING
ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE TRANSACTION, RELATED MATTERS AND THE PARTIES TO THE TRANSACTION. The materials filed by GAIN with the SEC may be obtained
free of charge at the SEC’s website at www.sec.gov or in the “Investor Relations” section of GAIN’s website
at www.gaincapital.com.
Participants in Solicitation
GAIN and its directors and certain of its
executive officers may be considered participants in the solicitation of proxies from GAIN’s stockholders in connection with
the proposed transaction. Information about the directors and executive officers of GAIN is set forth in its Annual Report on Form
10-K for the year ended December 31, 2019, which was filed with the SEC on March 16, 2020 and its proxy statement for its 2020
annual meeting of stockholders, which was filed with the SEC on April 29, 2020. These documents can be obtained free of charge
from the sources indicated above. Additional information regarding the participants in the proxy solicitations and a description
of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant
materials in connection with the transaction to be filed with the SEC when they become available.