Wall Street trading firm Cantor Fitzgerald is planning to sell its subsidiary, BGC Partners, to its affiliate, eSpeed Inc.

eSpeed was spun off from Cantor, and went public, in 1999. BGC was created by Cantor in 2004 to spin off its voice brokerage business. BGC had filed to go public too. Instead, to acquire BGC, eSpeed will issue an aggregate of 133,860,000 shares of its common stock and rights to acquire shares of its common stock. In the transaction, eSpeed’s shares are being valued at US$9.75 per share, a 6.09% premium.

The firms say that the combined company, to be known as BGC Partners Inc., will benefit from a streamlined product development pipeline, larger capital base, enhanced ability to attract and retain brokers, complementary cultures and values, and a management team of exceptional depth and breadth, all providing a stronger, integrated platform for continued growth.

In addition, the combination is expected to deliver tangible structural and operating synergies that will drive expense reductions and revenue enhancements. The combined company’s 2007 projected revenues are expected to be approximately US$1 billion. For 2008, the combined company’s projected revenues are expected to increase by more than 12% and to exceed US$1.1 billion in annual revenues.

Howard Lutnick, chairman, CEO and president of eSpeed, commented in a release, “We are extremely proud of each of these two companies and their strong positions in the marketplace. eSpeed is the technology driver of BGC’s voice and electronic broking business, and BGC’s performance drives eSpeed’s growth. The integration of BGC’s superior customer service, execution, and innovation with eSpeed’s powerful technology platform represents an ideal strategic fit. By combining these considerable strengths, we will achieve improved operating efficiencies and strengthen our market position, serving the best long-term interests of eSpeed’s stockholders, both companies’ customers and BGC’s employee-owners.”

Lutnick added, “Upon closing, we expect this combination will be immediately accretive to eSpeed stockholders, and it represents an important milestone in the building of BGC’s global brand. We fully expect to realize tremendous additional value over the long term by further building upon the combined company’s position as a market innovator and leader.”

“The strategic rationale for combining BGC and eSpeed is compelling,” said Lee Amaitis, chairman and CEO of BGC and vice chairman of eSpeed. “BGC and eSpeed share a vision for the future of voice, hybrid and electronic trading. This is the next step in providing exceptional value to our customers through more efficient joint product development, continuing advancements in trading technology and superior execution. We believe that the combined company will generate greater revenue opportunities by applying technology to improve voice broker productivity, while accelerating the pipeline from voice to fully electronic trading. Joining forces with eSpeed enables us to realize new synergies in technology infrastructure, product development and client coverage.”

“Based on the earnings multiples of publicly-traded companies in our peer group, we believe the value of BGC is in excess of US$1.4 billion,” Amaitis said. “Therefore, we believe this transaction represents exceptional value for eSpeed stockholders as well as tremendous upside for stockholders of the combined company.”

The board of directors of eSpeed, upon recommendation of a special committee consisting of all four independent directors, has approved the merger agreement.

Lutnick will be chairman and co-CEO of the combined company, and Amaitis will be co-CEO.

The deal is subject to eSpeed stockholder approval, FSA, NASD and other regulatory approvals, and customary closing conditions, and is expected to close in the fourth quarter of 2007 or early in the first quarter of 2008.