CME Group Acquires NEX Group in $5.5 Billion Deal

Combined company will bring the cash, futures and OTC markets together

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Mar 29, 2018
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Futures trading giant CME Group Inc. (CME, Financial) announced on Thursday it is buying NEX Group PLC (LSE:NXG, Financial) for 3.9 billion pounds ($5.5 billion).

According to the terms of the deal, CME will pay 5 pounds in cash and 0.0444 shares for each share of the London-based trading company, which equals approximately 10 pounds ($14) per share.

In a press release, Chicago-based CME said the acquisition of NEX, which provides currency and fixed-income platforms, as well as over-the-counter post-trade products and services, will bring together “two trading-industry trailblazers.” Terry Duffy, chairman and CEO of CME Group, added the combined company will be able to better serve customers.

"At a time when market participants are seeking ways to lower trading costs and manage risk more effectively, this acquisition will allow us to create significant value and efficiencies for our clients globally," he said.

NEX Group CEO Michael Spencer echoed this sentiment, claiming the union will be an “industry-changing transaction.”

“Bringing together cash and futures products and OTC services will be unique, offering clients improved access to trading, greater financial efficiencies and highly valuable data sets,” he said. “The technology and innovation opportunities will be diverse and extraordinary."

In addition to improving trading technology and streamlining access, the combined company expects the deal will broaden its offerings to include more market data, spot products and expand foreign exchange opportunities. It also plans to expand its Treasury offerings to include cash, which, according to CNBC, could potentially shake up the U.S. Treasury market as NEX operates one of the world’s largest platforms for U.S. Treasury trading, BrokerTec.

The deal is also expected to generate approximately $200 million in annual cost synergies by year-end 2021.

Shares of CME Group were down 0.65% at $157.81 on Thursday morning following the announcement. On the London exchange, shares of NEX Group gained 1.70% to close at 9.88 pounds.

GuruFocus estimates CME shares have gained 9% year to date, while NEX Group shares have risen approximately 60%.

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Following the close of the deal, which is expected to occur in the second half of the year, Spencer will join CME’s board of directors. London will be the company’s European headquarters.

Disclosure: No positions.