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London Capital (LCG.L) - acquisition of FuturesBetting.com Limited
LCG.L
Comment by Objective Capital , May 27, 2008
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London Capital announced this morning that it has acquired FuturesBetting.com, a Gibraltar based financial spread betting business. The consideration consists of an initial £200,000 paid on completion plus a maximum of a further £200,000 dependant upon performance over a three year period.
The acquisition has been financed out of existing financial resources within the Group and will not require any external debt or equity capital.
Objective's view:
With in excess of £10m of unencumbered cash on its balance sheet and a highly profitable spread betting business turning over around £14m last year, the consideration for this acquisition could be considered small change. FuturesBetting.com ceased trading in March this year and was a casualty of the demise of Global Trader Europe of which it was a client. This was therefore something of a fire sale hence the almost nominal price.
FuturesBetting .com was set up by its founders to cater for professional investors and is therefore a different business to Capital Spreads which was set up with the express intention of appealing to those investors who wanted a non intimidating, low cost, and easily understood spread betting platform. It is still the only, deposit only, non margin calling, automatic stop loss spread betting offering in the market and has been extremely successful in building up a large active customer base. We see the businesses as unlikely to be competing for the same customers, so LCG is not simply buying an expensive customer list containing many of the same names as its own but an entirely complementary business.
What Futures Betting .com may offer is an in-house alternative for those customers who want more than the Capital Spreads business model allows it to offer and who might otherwise migrate to another company’s platform.
We expect LCG to apply the same rigorous risk controls and cost management to this new business as to its existing portfolio of businesses. We understand that there is no plan to offer credit to clients, in line with LCG practice across its other businesses.
