KCG Holdings, Inc. (NYSE:KCG) Files An 8-K Entry into a Material Definitive Agreement

KCG Holdings, Inc. (NYSE:KCG) Files An 8-K Entry into a Material Definitive Agreement

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Item1.01.

Entry into a Material Definitive Agreement.

Agreement and Plan of Merger

On April20, 2017, KCG Holdings, Inc., a Delaware corporation (the
Company) entered into an Agreement and Plan of Merger (the Merger
Agreement) with Virtu Financial, Inc., a Delaware corporation
(Parent), Orchestra Merger Sub, Inc., a Delaware corporation and
an indirect wholly-owned subsidiary of Parent (Merger Sub). to
the Merger Agreement, subject to the satisfaction or waiver of
specified conditions, Merger Sub will merge with and into the
Company (the Merger), with the Company surviving the Merger as a
wholly-owned subsidiary of Parent (the Acquisition).

to the Merger Agreement, at the effective time of the Merger (the
Effective Time), each of the Companys issued and outstanding
shares of ClassA common stock, par value $0.01 per share (Company
ClassA Common Stock) will be cancelled and extinguished and
converted into the right to receive $20.00 in cash, without
interest (the Merger Consideration), less any applicable
withholding taxes. to the Merger Agreement, Parent will finance
the Merger Consideration with a combination of equity financing
to private placements of shares of Parents ClassA common stock to
North Island Holdings I, LP and Aranda Investments Pte. Ltd. and
debt financing to a debt financing commitment letter with
JPMorgan Chase Bank, N.A.

As of the Effective Time, (i)each stock option of the Company
that is outstanding and unexercised immediately before the
Effective Time will be cancelled in consideration for the right
to receive a cash payment equal to the excess, if any, of the
Merger Consideration over the exercise price of such stock
option; (ii)each stock appreciation right of the Company that is
outstanding and unexercised immediately before the Effective Time
will be cancelled in consideration for the right to receive a
cash payment equal to the excess, if any, of the Merger
Consideration over the exercise price of such stock appreciation
right; (iii)each restricted share unit of the Company will become
fully vested (contingent upon the closing of the Merger) and
cancelled and converted into the right to receive the Merger
Consideration; and (iv) the right of each holder of a warrant of
the Company that is outstanding immediately before the Effective
Time to receive shares of Company Class A Common Stock upon
exercise of each such warrant will be converted into the right to
receive, upon exercise of each such warrant, a cash payment equal
to the excess, if any, of the Merger Consideration over the
exercise price of such warrant.

The parties have each made customary representations and
warranties. The Company has agreed, subject to the terms of the
Merger Agreement, to various covenants and agreements, including,
among others: (i)to conduct its business in the ordinary course
and in a manner consistent with past practice; (ii)to promptly
call a meeting of its stockholders to vote on the Merger
Agreement and the Merger; (iii)to, through the Companys board of
directors, recommend to its stockholders that they vote to
approve the Merger Agreement and the Merger, subject to certain
exceptions to permit the Companys board of directors to comply
with its fiduciary duties; (iv)not to solicit proposals relating
to alternative transactions to the Merger with a third party or
engage in discussions or negotiations with respect thereto,
subject to certain exceptions to permit the Companys board of
directors to comply with its fiduciary duties; and (v)to use
reasonable best efforts to cooperate with Parents efforts to
obtain financing. Parent has agreed, subject to the terms of the
Merger Agreement, to various covenants and agreements, including,
among others, to use its reasonable best efforts to obtain the
equity financing and the debt financing described above or such
alternative financing as contemplated by the Merger Agreement.
The parties have also agreed to use their respective reasonable
best efforts to obtain any approvals from governmental
authorities for the Merger, including all antitrust approvals.

Each partys obligation to consummate the Merger is subject to
certain conditions, including, among others: (i)approval of the
Merger Agreement by the holders of a majority of the Company
ClassA Common Stock, voting together as a single class;
(ii)expiration or termination of applicable waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended; (iii)the receipt of certain other required governmental
or regulatory approvals; (iv)the absence of any order or legal
requirement issued or enacted by any court or other governmental
authority, which is in effect and prevents the consummation of
the Merger; and (v)the passing of 20 calendar days from the date
on which Parent mails to its stockholders an information
statement on Schedule 14C related to the approval by Parents
controlling stockholder of the Merger Agreement. Parents
obligation to consummate the Merger is also conditioned on, among
other things, the absence of any Company Material Adverse Effect
(as defined in the Merger Agreement) on the Company.

to the Merger Agreement, Parent is required to use its reasonable
best efforts to consummate the equity financing and the debt
financing. The Merger is not subject to a financing condition.

The Merger Agreement also contains certain specified termination
provisions, including, among others, a mutual termination right
if the Merger has not been consummated on or before January31,
2018. In certain circumstances in connection with the termination
of the Merger Agreement, the Company must pay to Parent a
termination fee equal to $45million (the Company Termination
Fee). The Company must pay to Parent the Company Termination Fee
in the event that Parent terminates the Merger Agreement
(i)following a Company Adverse Recommendation Change (as defined
in the Merger Agreement) by the Companys board of directors;
(ii)due to the failure of the Companys board of directors to
recommend the approval of the Merger Agreement and the Merger to
the Companys stockholders; (iii)due to the Companys material
breach, in a manner adverse to Parent, of its agreement not to
solicit proposals relating to alternative transactions to the
Merger or engage in discussions or negotiations with respect
thereto; and (iv)due to the Companys failure to convene a meeting
of its stockholders to vote on the Merger Agreement and the
Merger. The Company also must pay to Parent the Company
Termination Fee if the Merger Agreement is terminated under
certain specified circumstances and, within 12 months of such
termination, the Company enters into a definitive agreement with
respect to, or consummates, a competing proposal. If the Merger
Agreement is terminated because the Companys stockholders do not
vote to approve the Merger Agreement at a special meeting that is
properly convened but the Company does not enter into a
definitive agreement with respect to a competing proposal, the
Company will pay to Parent an amount up to $15million to
reimburse Parent expenses.

In connection with the Companys entry into the Merger Agreement,
Jefferies LLC (Jefferies), the beneficial owner of 24.5% of the
Company ClassA Common Stock, entered into a voting agreement with
Parent and Merger Sub to which Jefferies has agreed to vote its
shares of Company ClassA Common Stock for the approval of the
Merger Agreement and the approval of the transactions
contemplated thereby, including the Merger.

The foregoing description of the Merger Agreement is qualified in
its entirety by reference to the Merger Agreement, a copy of
which is filed herewith as Exhibit 2.1 and is incorporated herein
by reference.

The Merger Agreement has been attached to provide investors and
stockholders with information regarding its terms and is not
intended to provide any factual information about the Company,
Parent or Merger Sub. The representations, warranties and
covenants in the Merger Agreement were made only for the purpose
of the Merger Agreement and solely for the benefit of the parties
to the Merger Agreement as of specific dates. Such
representations, warranties and covenants may have been made for
the purposes of allocating contractual risk between the parties
to the Merger Agreement instead of establishing these matters as
facts, may or may not have been accurate as of any specific date,
and may be subject to important limitations and qualifications
(including exceptions thereto set forth in disclosure schedules
agreed to by the contracting parties) and may therefore not be
complete. The representations, warranties and covenants in the
Merger Agreement may also be subject to standards of materiality
applicable to the contracting parties that may differ from those
applicable to investors. Investors should not rely on the
representations, warranties and covenants or any descriptions
thereof as characterizations of the actual state of facts or
condition of the Company, Parent or Merger Sub or any of their
respective subsidiaries or affiliates. Moreover, information
concerning the subject matter of the representations, warranties
and covenants may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in
the Companys or Parents public disclosures.

Additional Information and Where to Find It

This press release may be deemed to be solicitation material in
respect of the proposed merger between KCG and Virtu (the
Merger). In connection with the Merger, KCG intends to file
relevant materials with the SEC, including a proxy statement on
Schedule 14A. INVESTORS AND STOCKHOLDERS OF KCG ARE URGED
TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING KCGS
PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED MERGER.
Investors and stockholders
will be able to obtain copies of the documents, when filed, free
of charge at the SECs website (http://www.sec.gov). Investors and
stockholders may also obtain copies of documents filed by KCG
with the SEC by contacting KCG at Investor Relations, KCG
Holdings, Inc., 300 Vesey Street, New York, NY 10282, by email at
[email protected], or by visiting KCGs website
(http://investors.kcg.com).

Participants in Solicitation

KCG and its directors, executive officers and other members of
management and employees may be deemed to be participants in the
solicitation of proxies from the holders of KCG ClassA Common
Stock in connection with the proposed Merger. Information about
KCGs directors and executive officers is available in KCGs proxy
statement for its 2017 Annual Meeting of Stockholders, which was
filed with the SEC on March31, 2017. Other information regarding
the participants in the proxy solicitation 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 to be filed with the SEC regarding the
proposed Merger when they become available. Investors and
stockholders should read the proxy statement carefully when it
becomes available before making any investment or voting
decisions.

Forward-looking Statements

Certain statements contained herein constitute forward-looking
statements within the meaning of the safe harbor provisions of
the U.S. Private Securities Litigation Reform Act of 1995.
Forward-looking statements are typically identified by words such
as believe, expect, anticipate, intend, target, estimate,
continue, positions, prospects, or potential, by future
conditional verbs such as will, would, should, could or may, or
by variations of such words or similar expressions. These forward
looking statements are not historical facts and are based on
current expectations, estimates and projections about KCGs
industry, managements beliefs and certain assumptions made by
management, many of which, by their nature, are inherently
uncertain and beyond our control. Any forward-looking statement
contained herein speaks only as of the date on which it is made.
Accordingly, readers are cautioned that any such forward-looking
statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are
difficult to predict including, without limitation, risks
associated with: (i)the inability to manage trading strategy
performance and grow revenue and earnings; (ii)the receipt of
additional payments from the sale of KCG Hotspot that are subject
to certain contingencies; (iii)changes in market structure,
legislative, regulatory or financial reporting rules, including
the increased focus byCongress, federal and state regulators,
self-regulatory organizations and the media on market structure
issues, and in particular, the scrutiny of high frequency
trading, best execution, internalization, alternative trading
systems, market fragmentation, colocation, access to market data
feeds, and remuneration arrangements such as payment for order
flow and exchange fee structures; (iv)past or future changes to
KCGs organizational structure and management; (v)KCGs ability to
develop competitive new products and services in a timely manner
and the acceptance of such products and services by KCGs
customers and potential customers; (vi)KCGs ability to keep up
with technological changes; (vii)KCGs ability to effectively
identify and manage market risk, operational and technology risk,
cybersecurity risk, legal risk, liquidity risk, reputational
risk, counterparty and credit risk, international risk,
regulatory risk, and compliance risk; (viii)the cost and other
effects of material contingencies, including litigation
contingencies, and any adverse judicial, administrative or
arbitral rulings or proceedings; (ix)the effects of increased
competition and KCGs ability to maintain and expand market share;
(x)the migration of KCGs Jersey City, NJ data center operations
to other commercial data centers and colocations; (xi)the
completion of the Merger in a timely manner or at all;
(xii)obtaining required governmental approvals of the Merger on
the terms expected or on the anticipated schedule; (xiii)KCGs
stockholders failing to approve the Merger; (xiv)the parties to
the Merger Agreement failing to satisfy other conditions to the
completion of the Merger, or failing to meet expectations
regarding the timing and completion of the Merger; the occurrence
of any event, change or other circumstance that could give rise
to the termination of the Merger Agreement; (xv)the effect of the
announcement or pendency of the Merger on KCG s business
relationships, operating results, and business generally;
(xvi)risks that the proposed Merger disrupts current operations
of KCG and potential difficulties in KCG employee retention as a
result of the Merger; risks related to diverting managements
attention from KCG s ongoing business operations; (xvii)the
outcome of any legal proceedings that may be instituted against
KCG related to the Merger Agreement or the Merger; and (xviii)the
amount of the costs, fees, expenses and other charges related to
the Merger. The list above is not exhaustive. Because forward
looking statements involve risks and uncertainties, the actual
results and performance of KCG may materially differ from the
results expressed or implied by such statements. Given these
uncertainties, readers are cautioned not to place undue reliance
on such forward-looking statements. Unless otherwise required by
law, KCG also disclaims any obligation to update its view of any
such risks or uncertainties or to announce publicly the result of
any revisions to the forward-looking statements made herein.
Readers should carefully review the risks and uncertainties
disclosed in KCGs reports with the SEC, including those detailed
in Risk Factors in PartI, Item 1A and elsewhere in the Annual
Report on Form 10-K for the year ended December31, 2016, and in
other reports or documents KCG files with, or furnishes to, the
SEC from time to time.

Item9.01 Financial Statements and Exhibits
(d) The following exhibit is filed with this report.

Exhibit No.

Description

2.1 Agreement and Plan of Merger, dated as of April20, 2017, by
and among Virtu Financial, Inc., Orchestra Merger Sub, Inc.
and KCG Holdings, Inc.


KCG Holdings, Inc. (NYSE:KCG) Recent Trading Information

KCG Holdings, Inc. (NYSE:KCG) closed its last trading session down -0.01 at 19.75 with 2,659,748 shares trading hands.

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