Alaric Securities celebrates at Nasdaq MarketSite
September 26, 2016

CBOE Holdings to buy BATS Global in $3.2 billion deal

Alaric Securities

CBOE Holdings Inc (CBOE.O) said it would buy BATS Global Markets Inc (BATS.Z) for about $3.2 billion, as the largest U.S. options exchange operator looks to diversify its revenue amid muted trading volumes.

The offer, which values the No. 2 stock exchange operator in the United States by volumes at about $32.50 per share, comes just over five months after BATS made its market debut at $22.88.

BATS shares were down about 1 percent in premarket trading on Monday, while those of CBOE were down more than 2 percent.

CBOE owns the Chicago Board Options Exchange and has an exclusive licensing deal on the S&P 500 index options contract through 2032. The exchange also has rights to the popular VIX volatility index.

The deal will help CBOE to add more asset classes and boost its position in the European market, where BATS owns the largest stock exchange.

CBOE said it expects to use BATS’ trading technology and will migrate all trading to a single platform.

CBOE’s acquisition of BATS is the latest in a string of mergers, bidding wars and failed deals among global exchanges in an industry that has been trying to consolidate for years.

BATS itself merged with Direct Edge in 2014 to become the second-largest U.S. stock exchange operator.

Nasdaq Inc (NDAQ.O) said in March it was buying U.S. options exchange operator International Securities Exchange for $1.1 billion from Deutsche Boerse AG (DB1Gn.DE).

CBOE Chief Executive Edward Tilly will lead the combined company and CFO Alan Dean will be the finance head.

The combined company will be based in Chicago, with offices in Kansas City, New York and London.

The deal is expected to add to CBOE’s adjusted earnings per share in the first year following the closure, likely in the first half of 2017.

CBOE expects to maintain its dividend but may suspend its share repurchase program, a company executive said on a conference call following the announcement of the deal.

BofA Merrill Lynch and Broadhaven Capital Partners LLC are financial advisers to CBOE Holdings. Sidley Austin LLP is CBOE’s legal counsel.

Barclays Capital and UBS Investment Bank are financial advisers to BATS, while Davis Polk & Wardwell LLP is its legal counsel.

Reporting By Sudarshan Varadhan and Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty)

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