Intercontinental Exchange Inc, Market Cap (as of 19/09/2014): $23.45bn
Intercontinental Exchange (NYSE: ICE), announced on September 5, 2014 that it has entered into a definitive agreement to acquire SuperDerivatives, a leading provider of risk management analytics, financial market data and valuation services. The acquisition will accelerate the expansion of ICE’s comprehensive multi-asset class clearing strategy. Terms include a purchase price of approximately $350m, entirely in cash. Completion of the deal is subject to regulatory approval and other closing conditions. The transaction is expected to close in the fourth quarter of 2014 and ICE will provide relevant guidance when it reports quarterly earnings on November 4.
Intercontinental Exchange is a network of regulated exchanges and clearing houses for financial and commodity markets. ICE delivers data, technology and risk management services to markets around the world through its portfolio of exchanges, including the New York Stock Exchange, ICE Futures and Liffe. On the other hand, SuperDerivatives provides risk management analytics and systems across all asset classes, including interest rates, FX, credit, equities, energy and commodities to customers ranging from banks, asset managers, corporations, central banks, auditors and brokers. Founded in 2000, and headquartered in New York, the company has 12 offices around the world and over 300 employees,
The Intercontinental Exchange has recently been very active in the market and has continued its policy of growth through M&A activity. A large portion of such strategic acquisitions has been successful while others have failed due to regulators’ concerns over a potential monopoly situation. The recent trend of ICE’s market involvement includes the acquisition of Singapore Mercantile Exchange (SMX), which, for the first time, provided the company with exchange and clearing infrastructure in Asia; as well as its strategic investment in the continental Europe-focused Holland Clearing House, also aimed at further extending the company’s comprehensive clearing strategy for financial products.
In June 2014, ICE completed a spin-off of Euronext N.V., the pan-European exchange group, after a successful attempt at integrating the NYSE Euronext’s European derivatives business, known as Liffe. The spin-off was planned from the very inception of the $8.2bn acquisiton of NYSE Euronext in November 2013. Following the spin-off Jeffrey C. Sprecher, Chairman and CEO of ICE, declared that the strategic objectives for the company involves a further integration of ICE and Liffe, the expansion of the company’s clearing capabilities and the delivery on its synergy targets.
The apparent rationale behind the SuperDerivatives acquisition is related to the fact that the company also owns a chat platform similar to the one used on Bloomberg terminals. In fact, the company’s DGX front-end data system is a web-based platform that delivers real time analytics, data, news and multi-participant chat with video in a cost-efficient manner. Other products and services include independent valuation, market data for mark-to-market, multi-asset derivatives front office and risk systems and a multi-asset OTC execution platform. ICE has long wanted to crack the market for providing high-tech information terminals and has recently been under growing pressure to do so as Bloomberg and other financial information providers push into its core markets. With the acquisition of SuperDerivatives, the Atlanta-based company will also get access to the Israeli group’s DGX product, which allows traders to access live pricing and news in addition to analysing theoretical trades before they execute them.
ICE’s move to get a toehold in messaging comes as Wall Street firms push back against Bloomberg’s dominance. CME, the futures exchange operator, has invested in Wickr, a start-up that is in talks with banks to create an alternative to Bloomberg instant messaging, and Goldman Sachs has spearheaded efforts to create a rival Wall Street chat service. A competing chat service could also face an uphill battle given the degree to which Bloomberg terminals remain entrenched on Wall Street – the private company says 20m chat exchanges take place over its terminals each day.
According to the Wall Street Journal and people familiar with the matter, other potential buyers who showed interest in SuperDerivatives include CME, Nasdaq and the recently listed Markit. However, it is unclear if any of those parties reached advanced discussions with SuperDerivatives and its advisers.
ICE was advised by Greenberg Traurig P.A., SuperDerivatives was advised by Barclays and White & Case LLP.
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