Nasdaq Strengthens Equities Options Business; To Buy ISE
Nasdaq, Inc. NDAQ will buy options exchange operator, International Securities Exchange (“ISE”) from Deutsche Borse Group for $1.1 billion. This acquisition will enable Nasdaq to enhance efficiencies for clients, ramp up its technology offering as well as innovate and experiment within the equity options industry.
The transaction, pending approvals, is expected to culminate in the latter half of 2016. The company intends to fund the deal via debt and cash in hand.
ISE, ISE Gemini and ISE Mercury are the three electronic options exchanges through which ISE operates. These exchanges serve as the housing for more than 15% of trading in U.S. options. Through this collaboration, both of these options businesses are well positioned to offer competitive pricing and improve the trading process.
The equities options business forms the core of Nasdaq’s long-term strategy and is integral to the strength of its franchise. The addition of ISE will thus complement Nasdaq’s business.
The client’s trading experience is expected to benefit from Nasdaq’s renowned INET technology and multicore system. Nasdaq will be able to provide higher throughput and lower latency systems.
On the back of ISE’s complementary strengths, its existing platforms and INET technology, Nasdaq will have compelling product and service offerings benefiting market participants. Additionally, after the transaction closes, Nasdaq will operate PrecISE Trade, a front-end order and execution management system for trading options and stock-option combinations.
Besides, the company expects to save about $40 million in annualized expense synergies. The company expects the deal to be accretive within a year of closing as well as generate superior returns on capital.
Pursuant to the deal, Nasdaq will gain an additional 20% stake in The Options Clearing Corp., taking its stake to 40% in the world’s largest equity derivatives clearing corporation and one of the largest horizontal clearinghouses.
During the fourth quarter of 2015, this Zacks Rank #3 (Hold) securities exchange company agreed to acquire Chi-X Canada, an Alternative Trading System for Toronto Stock Exchange (TSX) and TSX Venture Securities, from Chi-X Global. The acquisition will provide Nasdaq with direct access to the Canadian equities market and is expected to close in the first quarter of 2016. The company also completed its acquisition of SecondMarket – the second-most active private tender market in the US.
Following the inorganic route to ramp up one’s growth profile seems a well-accepted strategy among insurers. Recently, Sun Life Assurance Company of Canada, the wholly owned subsidiary of Sun Life Financial Inc. SLF acquired the employee benefits business of Assurant Inc. AIZ for $940 million. Also, Marsh & McLennan Agency LLC (“MMA”), the middle market agency subsidiary of Marsh & McLennan Companies, Inc. MMC, acquired Celedinas Insurance Group for an undisclosed amount.
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