Reuters reported that last week the acquisition of the financial services corporation, NYSE Euronext Inc. by electronic trading platform Intercontinental Exchange Inc. (ICE - Free Report) has been approved by the Securities and Exchange Commission (SEC). The acquisition was announced in Dec 2012 and was pending regulatory approval.
Based on the closing price of $185.80 of ICE on Aug 1, 2013, the company is acquiring NYSE for a purchase consideration of $10.6 billion, higher than the $8.2 billion takeover price decided earlier. Through the deal Intercontinental Exchange aims to reach out to newer markets and diversify among multiple asset classes.
This takeover will unite two leading exchange groups to ultimately form a diversified global exchange operator. This amalgamation would mark the evolution of the third largest global exchange group after Hong Kong Exchanges and Clearing, and CME Group Inc. (CME - Free Report) . However, the deal requires approval from European national regulators before it is finalized. The combined entity is expected to be better positioned to compete and serve customers on a large scale.
Upon culmination of the takeover, Euronext, the European electronic stock exchange of NYSE that operates the Paris, Amsterdam, Brussels and Lisbon stock exchanges is expected to be divested. Also, as previously decided, Europe’s second largest derivatives market – NYSE Liffe will be merged into Intercontinental Exchange Clear Europe. This deal is expecting culmination in Sep 2013 and is pending regulatory approval from national regulators in Europe.
The deal is expected to be accretive to Intercontinental Exchange’s 2013 earnings and generate higher returns on invested capital 2014 onward. Alongside, the company is expected to tap the promising growth opportunities in the U.S. and European markets. NYSE being a big name in the market, will give Intercontinental Exchange an opportunity to take a share of the pie that the market has to offer. Through the acquisition, Intercontinental Exchange will also be able to foray into newer markets and come up with better products and services on a global platform by utilizing NYSE’s expertise and services.
Intercontinental Exchange currently carries a Zacks Rank #3 (Hold). Among other electronic trading platforms, MarketAxess Holdings Inc. (MKTX - Free Report) carries a favorable Zacks Rank #1 (Strong Buy).