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Peregrine Financial Group Inc., the third-biggest Chicago-based futures broker, agreed to buy rival Alaron Trading for an undisclosed price as it builds its retail futures business.
The combined company, which brings together two family-owned businesses in an industry increasingly dominated by global behemoths, will have about $425 million under management, according to executives from both companies. The acquisition is the first of what Peregrine President and Chief Operating Officer Russ Wasendorf Jr. says will be a series of purchases en route to a target of $1 billion under management.
“You need to get to critical mass,” Mr. Wasendorf says in a telephone interview. More acquisitions are in the offing, he adds, particularly as new rules for currency trading that go into effect later this year force smaller brokers to seek bigger pools of capital.
“It absolutely increases our economy of scale,” Mr. Wasendorf says. “As we continue to add more assets, it drops directly to the bottom line.”
Peregrine Financial Group, which does business as PFGBest, was founded by Mr. Wasendorf’s father and has about 225 employees. Alaron has fewer than 100. Steve Greenberg, Alaron’s founder, will stay on, running his business as a unit of the larger company. Mr. Wasendorf said he would keep as many “key employees” on Alaron’s staff as possible.
The brokerages have competed in the retail futures business for 20 years. Last year was a particularly brutal one, as interest rates slumped to near zero, curtailing the profits that such firms typically make on the assets they hold for their customers.
Earlier this year, Mr. Wasendorf, Mr. Greenberg and Mr. Greenberg’s sister and Alaron executive Carrie Greenberg met at the Capitol Grille in Streeterville to hash out a shared vision of their businesses. They signed the deal on May 14.