Moving ahead with its restructuring strategy, IntercontinentalExchange Group Inc. (ICE - Analyst Report), or ICE Group, raised about €1.4 billion (or $1.9 billion) from the initial public offering (IPO) of Euronext NV, which began trading from Jun 20 under the symbol ‘ENX’ in the Euronext stock exchanges of Paris, Amsterdam and Brussels.
Furthermore, ICE Group signed a pact with ULLINK to vend of two more units of NYSE Technologies, which was acquired as part of NYSE Euronext Inc. acquisition in Nov 2013. ULLINK is a France-based firm that offers electronic trading software and connectivity services to the exchanges. Notably, ULLINK is supported by HG Capital.
Per the agreement, ULLINK has agreed to buy Metabit and NYFIX Inc. for undisclosed terms and value. Awaiting regulatory approvals, the deal is expected to culminate by Sep 2014. ICE Group appointed Evercore as its exclusive financial advisor for the deal, while Shearman & Sterling LLP was the legal advisor.
NYSE had acquired NYFIX in Nov 2009 for $144 million. NYFIX Marketplace provides exhaustive technology solutions to over 1,000 trading counterparties across financial services markets globally.
On the other hand, Tokyo-based Metabit was acquired by NYSE in Sep 2011 to accelerate NYSE’s market access products growth in Asia. Metabit offers high quality market access products through more than 140 trading firms across Japan and Asia.
Going forward, the acquisition of Metabit and NYFIX is expected to expand ULLINK’s scale of operations. The deal will also strengthen the buyer’s competitive position as a leading and comprehensive global provider of trading technology products and services.
Consolidation on Track
Since the NYSE acquisition, ICE Group aimed to operate as a start-up and concentrate on consolidating its operations within the interest-rate futures and U.S. stock exchanges acquired through the NYSE Euronext deal. The business centralization will help the company gain efficiencies of scale, reduce cost and amplify competitive advantage.
Subsequently, the company contemplated the sale of the non-exchange technology businesses acquired through NYSE – NYFIX, SuperFeed, Wombat Financial Software and Metabit. Last week the company also announced the sale of Wombat and SuperFeed to SR Labs for an undisclosed value. [Read: ICE Group Vends NYSE's Tech Unit as Per Growth Plan]
Apart from the Euronext divestment, ICE Group has plans to terminate NYSE Liffe’s New York Portfolio Clearing (NYPC) operations from mid-2014 onwards.
ICE Group’s aggressive efforts to vend non-exchange related businesses are also related to its debt burden. Notably, the company’s debt-to-EBITDA rose to about 2.56x from the $11 billion NYSE acquisition. Going ahead, management aims to improve this leverage to at least 1.5x in the next 1.5 years by debt reduction and alongside, improve cash flows for long-term growth investments and incremental shareholder returns.
Currently, ICE Group carries a Zacks Rank #3 (Hold). Some better-ranked financial stocks worth considering include Euronet Worldwide Inc. (EEFT - Snapshot Report), Ladder Capital Corp. (LADR - Snapshot Report) and VeriFone Systems Inc. (PAY - Analyst Report). All these stocks sport a Zacks Rank #1 (Strong Buy).