Nasdaq to buy ISE from Deutsche Boerse for $1.5b

The ISE deal would free up capital for Deutsche Boerse, which has said it plans to merge with the London Stock Exchange Group (above) to create a European trading powerhouse that could better compete against US rivals.
The ISE deal would free up capital for Deutsche Boerse, which has said it plans to merge with the London Stock Exchange Group (above) to create a European trading powerhouse that could better compete against US rivals.PHOTO: AGENCE FRANCE-PRESSE

US options exchange operator deal gives it over 40% of market

NEW YORK • Nasdaq has said it would buy the International Securities Exchange (ISE) for US$1.1 billion (S$1.5 billion) from Deutsche Boerse of Germany, in yet another deal among exchange operators as even bigger takeovers loom.

ISE, the United States options exchange operator, runs three electronic options exchanges which together account for more than 15 per cent of US volume, while Nasdaq operates another three.

Combined, Nasdaq would command more than 40 per cent of the market, extending its lead as the No. 1 US options exchange operator.

RIGHT MOVE

I believe this transaction advances our ambitions with all our stakeholders, including clients and shareholders.

NASDAQ CHIEF EXECUTIVE BOB GREIFELD, on boosting the Nasdaq franchise

"The equities options business has been core to our long-term strategy, and we believe an essential component to the strength of the Nasdaq franchise," Nasdaq chief executive Bob Greifeld said in a statement.

"I believe this transaction advances our ambitions with all our stakeholders, including clients and shareholders."

The deal would also free up capital for Deutsche Boerse, which has said it plans to merge with the London Stock Exchange Group to create a European trading powerhouse that could better compete against US rivals.

Intercontinental Exchange said it may make a rival bid for the LSE, raising the prospect of a takeover battle.

Nasdaq, which plans to move ISE's trading platforms onto Nasdaq technology, said it could strip out US$40 million from the two businesses through the transaction.

The deal would also give Nasdaq an additional 20 per cent stake in the Options Clearing Corp, for a total of 40 per cent ownership in the world's largest equity derivatives clearing corporation.

Mr Greifeld said he had been looking to buy ISE for years, and talks with Deutsche Boerse CEO Carsten Kengeter picked up over the past three months.

The deal does not include ISE's stake in No. 2 US stock exchange operator BATS Global Markets, or blockchain start-up Digital Asset Holdings, which will continue to be owned by Deutsche Boerse, the German company said.

Nasdaq said the transaction was expected to be finalised in the second half of the year, pending regulatory approval, and it would likely increase earnings within 12 months of closing.

Nasdaq has struck four acquisitions since the beginning of last year, according to Standard & Poor's Capital IQ, that have helped boost its profits and share price.

These include Chi-X Canada, that country's largest alternative trading system, in a deal that closed last month; and index provider Dorsey, Wright & Associates last year.

The transaction is expected to close by the year end.

REUTERS, NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on March 11, 2016, with the headline 'Nasdaq to buy ISE from Deutsche Boerse for $1.5b'. Print Edition | Subscribe