Getco to buy Knight Capital for $1.4 billion

(Reuters) - Knight Capital Group Inc , which suffered a near-fatal trading error in August, said it will be acquired by electronic trading firm Getco Holdings Co in a deal valued at $1.4 billion in cash and stock.

The deal seals a whirlwind five months for Knight, which executes about 10 percent of U.S. equity trading volume.

The company was rescued by a group of investors led by Jefferies Group Inc and including Chicago-based Getco who injected $400 million after errant software sent millions of unintentional orders in the opening 45 minutes of the U.S. trading day on August 1.

Knight and Getco will combine to form a new publicly traded company. Knight shareholders other than Getco will have the right to elect either $3.75 per share in cash or one share of common stock in the new business.

The offer represents a 13 percent premium to Knight's closing stock price of $3.33 on Tuesday. It is also a 51 percent premium to Knight's closing price on November 23 when reports surfaced that the company was looking for buyers.

"The transaction provides near-term certainty in the form of cash," Knight Chief Executive Thomas Joyce said in a statement.

Sources told Reuters on Tuesday that Getco was poised to buy Knight after sweetening its offer to beat out rival Virtu Financial LLC.

(Reporting by Tanya Agrawal in Bangalore; Editing by Sriraj Kalluvila)

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