Nasdaq Inc. (NDAQ - Free Report) has announced to buy Cinnober for $190 million in cash. The acquisition will consolidate the company’s presence as an ace infrastructure technology provider.
Swedish company Cinnober has been providing financial technology to brokers, exchanges and clearinghouses across the globe ever since it was co-founded in 1998.
The acquisition is thus in tandem with Nasdaq’s strategy to ramp up its technology and analytics capability. Meanwhile, Cinnober will be able to expand its technology platform, leveraging Nasdaq’s expertise in turn.
Nasdaq’s organic growth has been aided by its strategy to accelerate its non-transaction revenue base, which includes market technology, listing and information revenues. The company noted that Market Technology business is growing at a rapid pace and thus addition of Cinnober will boost capabilities of the division.
The acquisition is estimated to generate 10% return on invested capital within 3-5 years and be accretive to operating net income per share within a year of its closing.
Nasdaq intends to deploy cash in hand or liquidity available under existing credit facilities to fund the acquisition. Nevertheless, the acquirer remains steadfast in deploying capital effectively including supporting organic investment opportunities, dividend hikes and share buybacks as well as achieving a mid-2x’s gross debt-to-EBITDA ratio by mid-2019.
Nasdaq has grown meaningfully over the years through a number of strategic expansions. Its acquisition list remains impressive with Chi-X Canada, International Securities Exchange, Marketwired, Boardvantage, Sybenetix et al. The company’s M&A activity expanded its technology offering, fortified its Corporate Solutions business, improved its market surveillance techniques as well as boosted its global information services business.
This Zacks Rank #3 (Hold) company is on track with its goals of maximizing opportunities as an innovative analytics and technology partner in the capital markets, developing and deploying its marketplace economy technology strategy and consolidating its competitive edge in core businesses. Shares of Nasdaq have rallied 19.6% year to date, outperforming the industry’s 10.4% increase.
Stocks to Consider
Some better-ranked stocks from the finance sector are Alleghany Corporation (Y - Free Report) , NMIH Holdings Inc. (NMIH - Free Report) and The Navigators Group, Inc. (NAVG - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company’s average four-quarter positive surprise is 17.61%.
NMI Holdings provides private mortgage guaranty insurance services in the United States. The company delivered an average four-quarter beat of 29.85%.
Navigators Group underwrites marine, property and casualty plus professional liability insurance products and services in the United States and internationally. The company pulled off positive surprises in the trailing four quarters with an average earnings surprise of 19.54%.
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