Cantor agrees to sell unit to ESpeed

Cantor Fitzgerald agreed to sell its BGC Partners brokerage unit to ESpeed Inc., a publicly owned electronic trading house controlled by Cantor, in a deal valued at $1.3 billion.

The acquisition would enable Cantor, a New York bond-trading firm that lost hundreds of employees in the Sept. 11 terror attacks, to consolidate its interdealer broker businesses and end all revenue-sharing accords with ESpeed, which some ESpeed investors have criticized.

Cantor, however, would retain voting control over the combined ESpeed-BGC, which would be called BGC Partners and trade on Nasdaq.

The current BGC said it would withdraw a proposal it made this year for a $460-million initial public offering.

The transaction values ESpeed’s Class A shares 6.1% higher than their closing price Tuesday of $9.75 a share.

That’s lower than a purported $12-a-share takeover offer for E- Speed made in April by British interdealer broker Tullett Prebon, according to reports at the time.

BGC, which had first-quarter revenue of $249 million, is valued at about $1.2 billion, based on ESpeed’s stock price Tuesday.

Addressing concerns during a conference call Wednesday that the deal undervalues ESpeed, Howard W. Lutnick -- who will be chairman and co-chief executive of the combined company -- said the figure represented both a premium on ESpeed’s stock price and a discount from what BGC wanted to go public at.

He also said, “I cannot envision a third party effectively coming in to offer a deal to E- Speed that either Cantor or BGC would accept, because of the joint services agreement and revenue relationships between the two companies.�

Lutnick is chairman and CEO of ESpeed, as well as president and CEO of Cantor.

ESpeed shares rose 4 cents to $9.23. Public investors would own 16% of the combined company.