TheStreet: Any acquisitions on your radar screen?
I obviously can't name names, but there are potential targets out there that we think are interesting. I assure you it will be value-added.
On Thursday, CME Group Inc. agreed to a $5.5 billion takeover of U.K.-based trading platform NEX Group plc (NEXGY) in the latest wave of consolidation in global exchange markets that falls on the one-year anniversary of the failure of Germany's Deutsche Boerse (DBOEY) to tie up with the London Stocks Exchange (LNSTY)
CME Group, which owns and operates both the Chicago Board of Trade and the Chicago Mercantile Exchange, will pay 500 pence and 0.0444 in new CME shares for each for each NEX Group share in a deal that values the British group, whose platform facilitates the trading of currencies and government bonds at £3.9 billion ($5.5 billion). The price tag marks just a 2.9% premium to NEX Group's Wednesday closing price, although the stock has gained nearly 45% since news of the CME Group's interested was first reported on March 15.
"At a time when market participants are seeking ways to lower trading costs and manage risk more effectively, this acquisition will allow us to create significant value and efficiencies for our clients globally," said Duffy. "As one organization, we will be able to employ the complementary strengths of each company to serve a wider client base while diversifying our combined businesses across futures, cash and OTC products and post-trade services."
"There's no question that when you get these products on a single platform, both will benefit immensely," Duffy said on a media call following the deal announcement Thursday morning. "The users are going to be huge beneficiaries."
"Effectively what we're building is a big supermarket," NEX Group CEO Michael Spencer said on the call. "Why do people shop in supermarkets? It's useful to buy everything in one place."
The two leaders made it clear they are not going to change the structure "at all" when it comes to broker technologies, Duffy said. "I think it's really important for the participants to know there will be no disruption, zero disruption, on the platform," Duffy added.
NEX Group shares were marked just 0.41% higher at £9.72 each, suggesting investors might be waiting for a increased cash component in the deal, which collectively values the shares at £10.00 each based on CME's Wednesday closing price of $158.84 and its market cap of $54.07 billion.
Spencer, one of the most well-known names in London's financial market community and a long-time industry veteran, will join the CME Group Board of Directors, the companies said.
"CME's decision to choose London as its European headquarters is also a signal of tremendous support for Britain's financial services sector," Spencer said. "Bringing together cash and futures products and OTC services will be unique, offering clients improved access to trading, greater financial efficiencies and highly valuable data sets. The technology and innovation opportunities will be diverse and extraordinary."
The tie-up will first need regulatory approval, however, and U.K. and EU officials have been loth to accept cross-border deals in the exchange business, with six separate attempts to purchase the LSE Group knocked back over the past 17 years.
On this date last year, in fact, EU Competition Commissioner Margrethe Vestager said Deutsche Boerse's €29 billion tie-up "would have significantly reduced competition by creating a de facto monopoly in the crucial area of clearing of fixed income instruments" and blocked the proposed merger.