Nasdaq (Nasdaq:NDAQ) agreed to acquire New York-based International Securities Exchange (ISE), an operator of three electronic options exchanges, from Deutsche Börse Group (Xetra: DB1), for $1.1 billion. Nasdaq intends to fund the purchase price through a mix of debt and cash on hand.
The transaction is subject to customary closing conditions, including receipt of required regulatory approvals.
The deal is expected to be accretive to Nasdaq earnings within 12 months of closing and deliver attractive returns on capital. Nasdaq does not expect a material impact on financial leverage or capital return strategy.
ISE operates three electronic options exchanges: ISE, ISE Gemini and ISE Mercury. ISE’s exchanges serve as the venues for more than 15% of trading in U.S. options. The deal is expected to close in the second half of 2016.
“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,” said Bob Greifeld, Nasdaq, CEO. “I believe this transaction advances our ambitions with all our stakeholders, including clients and shareholders.”
Following the close of the transaction, Nasdaq will operate PrecISE Trade, an award-winning front-end order and execution management system for trading options and stock-option combinations; as well as ISE ETF Ventures, which offers a broad range of capabilities in index development, index licensing, financing, and marketing of exchange-traded products.
PrecISE Trade can be easily installed on a desktop to connect traders to ICE options exchanges and we will evaluate how it can be implemented across all our North American equities, derivatives and fixed income trading platforms.
“PrecISE can be seamlessly installed on a desktop to connect traders to ISE options exchanges, and we will look closely at how it can be used across all our North American trading platforms,” said Tom Wittman, EVP and Global Head of Equities, Nasdaq. “The hallmark of Nasdaq’s DNA is to provide innovative solutions to reduce inefficiency and improve the way market participants trade and interact. The ISE acquisition squarely fits within these objectives.”
As part of the transaction, Nasdaq will gain an additional 20% stake in The Options Clearing Corporation, for a total of 40% ownership in the world’s largest equity derivatives clearing corporation and one of the largest horizontal clearinghouses. ISE also operates ETF Ventures, which offers a broad range of capabilities in index development, licensing, financing, and marketing of exchange-traded products; and Longitude, a technology that uses parimutuel principles to aggregate liquidity and produce fair and efficient prices for applications in a diverse range of industries.
Within 18 months of the deal closing, Nasdaq expects the combined organization to realize a minimum of $40 million in annualized expense synergies. Bringing these two options businesses together will result in more competitive pricing to the industry, and enhanced efficiencies to clients. “The merger of Nasdaq and ISE’s innovative options franchises will result in a combination of talent and technology from both organizations,” added Wittman.
Nasdaq is a leading provider of trading, clearing, exchange technology, listing, information and public company services across six continents. Through its diverse portfolio of solutions, Nasdaq enables customers to plan, optimize and execute their business vision with confidence, using proven technologies that provide transparency and insight for navigating today’s global capital markets. As the creator of the world’s first electronic stock market, its technology powers more than 70 marketplaces in 50 countries, and 1 in 10 of the world’s securities transactions. Nasdaq is home to more than 3,700 listed companies with a market value of approximately $9.6 trillion and nearly 10,000 corporate clients.