US futures exchange operator CME has agreed to acquire UK FinTech powerhouse and post-trade services provider NEX Group in a deal worth £3.9 billion.
The move will streamline access and new trading opportunities across spot and futures FX products, and cash, repo and futures products in US Treasuries, both firms said.
CME added that combining NEX’s electronic FX and fixed income election platforms will improve technology and reduce the amount of touchpoint clients need to trade certain instruments. In addition, the union will boost post-trade and data services for both companies.
Following completion of the buyout, expected in the second half of this year, NEX CEO Michael Spencer will join the CME board of directors and remain with the combined business as a special advisor, working to drive the integration and creation of the new company.
“The combination of NEX and CME will be an industry-changing transaction,” Spencer commented. “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. Clients will be better served… CME’s decision to choose London as its European headquarters is also a signal of tremendous support for Britain’s financial services sector.”
CME group chairman and CEO, Terry Duffy, added that at a time when market participants are seeking to lower trading costs and manage risk more effectively, the acquisition will create significant value for clients globally.
“Building on NEX’s deep roots in Europe and Asia, and CME’s strong technology platform, we will transform our international profile and broaden our distribution network in spot and futures FX products as well as cash, repo and futures products in U.S. Treasuries,” he said.
Terms of the deal include a purchase price of £10 per share, 50% in cash and 50% in stock, meaning NEX shareholders will receive £5 in cash and 0.0444 shares of CME Group for each NEX share. The total equity value stands at £3.9 billion, or $5.4 billion.
An analyst note from investment bank Librium stated the offer, which is slightly above what the market predicted it would be, was an attempt to deter bids from other exchange groups to acquire NEX Group.
“Following the confirmation that CME was entertaining a bid for NEX we suggested a take-out price of c.900p and in the event of a competitive situation, which we viewed as likely, then a price of +1000p was not unreasonable. CME has this morning bid 1000p, clearly aiming to deter any competitive threat,” Liberum said.
Another analyst note from Exane BNP Paribas suggested CME could become a true competitor in the OTC clearing space in Europe, where LCH currently dominates.
“One might argue the combination of CME’s clearing house and NEX’s TriOptima compression service might increase CME’s credibility as a competitor in the OTC clearing market, though we would expect TriOptima to remain open to other CCPs,” Exane BNP Paribas commented.
“Focus seems to be on creating a futures, cash, OTC franchise, helping users to lower cost of trading. The release highlights the acquisition as also expanding CME’s presence into EMEA and APAC.”
Last year CME Group shut down its European-based exchange, CME Europe, but said it will maintain a headquarters in London.