MF Global Ltd. (NYSE: MF), a leading broker of exchange-listed futures and options, today announced the strategic decision to no longer participate in the U.S. Futures Exchange (USFE), a Chicago-based electronic futures exchange. The company will take an impairment charge related to its equity investment in USFE.
"We evaluated a number of strategic alternatives for USFE in the context of MF Global's market model and overall growth strategy," said Bernard W. Dan, chief executive officer, MF Global. "The decision to exit the business and take the impairment charge is a reflection of our commitment to appropriately allocate our human and financial capital to those areas that will enhance operating margins and deliver long-term shareholder value."
Absent a sale of USFE, MF Global estimates that in its third fiscal quarter it will take a non-cash impairment charge of $9 million to $11 million, related to its equity investment in the exchange and a cash charge of $3 million to $5 million, net of tax. USFE represented approximately $7 million of expense to MF Global annually, net of tax.
In connection with the separation and the company's IPO, Man Group plc transferred a direct economic interest of 46.1 percent in USFE to MF Global. Together with a 1.8 percent interest held prior to the IPO, MF Global currently holds 47.9 percent of the interest in the exchange.
In a related announcement, the USFE has stated its intention to seek a strategic sale of its operations with the objective of reaching a resolution by December 31, 2008.