LMAX Reportedly on the Shopping Block at Betfair

According to a report from The Times, gaming company Betfair (BET.L) may be close to selling its LMAX unit as well as leave unregulated markers as the firm’s new CEO Breon Corcoron is expected to focus on its core gaming business. The strategy change occurs as Betfair exited both Germany and Greece during November. Betfair […]

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According to a report from The Times, gaming company Betfair (BET.L) may be close to selling its LMAX unit as well as leave unregulated markers as the firm’s new CEO Breon Corcoron is expected to focus on its core gaming business. The strategy change occurs as Betfair exited both Germany and Greece during November. Betfair exited Germany after the country had levied a turnover tax on sport events gambling. Later in the month they left Greece as the country has seen an exodus of gaming companies due to a lack of clarity on new regulations passed there.

For Corcoron, Thursday’s Interim Results release will mark his first full quarter at Betfair after becoming CEO on August 1st, having previously been the COO at Paddy Power PLC.

For LMAX, FSA Regulated FX and CFD exchange has never been reported as profitable. However, its annual results for April 2011 to 2012 released in June showed encouraging volumes data and indicated it was close achieving break-even. Also, in its most recent Interim Results release in September, Betfair stated “LMAX continues to win new customers for its exchange product and volumes have remained robust.” Nonetheless, LMAX appears to be no more than an investment for Betfair that was based on leveraging a financial exchange with the gaming company’s existing matching engine technology. As such, with Corcoron reportedly focusing on Betfair’s core regulated businesses, LMAX would be seen as a likely sellable asset. On the other hand, with prices for FX related firms being soft in the current environment, and Betfair claiming to have satisfactory financial liquidity, it could make more sense for Betfair to continue holding onto LMAX as it could probably get a better price when overall volumes pick up.

Betfair won’t be the first to leave LMAX as earlier this year Goldman Sachs, who had a 12.5% stake in the firm, decided to sell it back to Betfair.

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9 Comments

  1. Andy

    I really hope customer experience stays the same, even if it gets sold (i’m an existing client). Really would’nt want to go back to what i had before.

    Who could be interested in buying in this environment? With the looming regulations, the exchange tech and MTF license might be interesting to some who will will need to migrate their OTC business onto exchange/mtf/otf in the future. It could easily be adapted for swap trading for example, or any other asset class. I could imagine interest from that direction. But such a buyer probably will only use the tech and license and doesn’t need existing relationships that focus on retail.

    You think other retail firms are interested in this?

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  2. Ron FinbergRon Finberg

    @Andy – According to the Times post they wrote “The struggling business is tipped to attract interest from its management.” We’ll see where it goes.

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  3. Michael Greenberg

    i bet every major player in the market (brokers and tech firms) would LOVE to get a piece of lmax

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  4. Andrea

    Saxo could find LMAX interesting as they need something to revitalize their technology offering considering recent troubles with layoffs. Saxo used to be a leader in new innovative products in retail FX. Together with LMAX, they would be a killer combination.

    Also one of LMAX’s partners a forex broker for professionals Armada Markets has been pretty successful in 2012, especially in Asia. Considering Armada’s experienced management team I wouldn’t rule out Armada being one of the interested parties to acquire a stake in LMAX. They would actually make a great match.

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  5. Michael Greenberg

    from what i hear armada wasn’t that successful in 2012, in any case if betfair do indeed sell lmax (there’s big gap between talking about it and actually doing it) then it’s massive lose for them and huge win for the buyer

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  6. Andy

    Lmax apparently paid GBP 10 mm for Goldmans 12.5% stake back in March – that would value the firm at GBP 80 mm (USD 130 mm). Not sure what it would sell for now, but i doubt smalltimers like Armada can finance such a deal. Also, back then they had virtually no volume, and now they have 2 to 3 billion ADV, pointing upwards. So i guess they would be looking for more?

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  7. presseus@gmail.com

    Armada: no chance they ever do such thing, too small, too short sighted, too restricted. Saxo: Why would they get into low-margin exchange business. Potential bidder may be: Marex Spectron, Jeffries, Getco maybe. Perhaps some Russians. IMHO of course.

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  8. John

    Bummer, this is actually my favourite broker as far as trading goes. Too bad they still hide the MT4 offer on their site!

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  9. Adam

    FXCM I’m sure would be in for them.

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