Deutsche Börse Acquires SimCorp for €3.9b, Reports 12% Jump in Q1 Profits

Thursday, 27/04/2023 | 09:50 GMT by Damian Chmiel
  • Group wants to create new Investment Management Solutions division.
  • In a separate update, the company reported increasing profit in the latest quarter.
Deutsche-Börse-AG_Cutout-Logo-Mock-Up
Deutsche Börse Group

Deutsche Börse Group, the operator of the German stock exchange , published two important updates on Thursday concerning the results for the first quarter of 2023 and the acquisition of SimCorp, a provider of investment management solutions.

In response to the latest reports, the company's shares on the German stock exchange (XETR: DB) are losing nearly 7% and falling to EUR 170, the lowest monthly level. On the other hand, SimCorp (CPH: SIM) is in the process of increasing by 38%.

Deutsche Börse Announces Acquisition and Launch of New Segment

Deutsche Börse AG announced a voluntary recommended public offer to acquire all shares (except for its own shares) of SimCorp A/S at 735.0 DKK per share in a transaction fully financed by debt. Thus, SimCorp A/S is valued at EUR 3.9 billion.

Parallel to the acquisition of SimCorp A/S, Deutsche Börse AG plans to merge its existing subsidiaries Qontigo and ISS, which deal with data and analysis, under one leadership. Upon completion of the offer, the merger of Qontigo and ISS and SimCorp A/S will be grouped within the newly created Investment Management Solutions segment to drive further growth, efficiency, and full crystallization of value.

"Both transactions will bring long-term growth, sizeable and tangible synergies, and a significant increase of our recurring revenues," Theodor Weimer, the CEO of Deutsche Börse AG, said. "We would be delighted to welcome SimCorp A/S, which has been a trusted business partner for many years, to Deutsche Börse Group and to embark on this exciting journey together."

After the offer is finalized, Deutsche Börse AG anticipates achieving annual EBITDA synergies of EUR 90 million within a span of three years. This includes EUR 55 million in cost synergies and EUR 35 million in revenue synergies. However, it's important to note that there will be a one-time cost of approximately EUR 100 million to attain these synergies.

Deutsche Börse's shares are falling to EUR 170, losing about 7% on Thursday. Meanwhile, shares of SimCorp listed on the Danish stock exchange are gaining nearly 40% and rising to DKK 732, which is the highest since January 2022.

DB shares (candlestick chart) and SIM shares (line chart). Source: Tradingview.com
DB shares (candlestick chart) and SIM shares (line chart). Source: Tradingview.com

Details of the Deutsche Börse Transaction

The offer price for SimCorp represents a premium of 38.9% and a premium of 45.3% compared to the closing price of 529.0 DKK and a 3-month volume-weighted average price of 505.7 DKK, respectively, as of 26 April 2023.

The Board of Directors at SimCorp A/S has unanimously decided to recommend shareholders of SimCorp A/S to accept the offer once it is made public. Based on anticipated annual synergies, the transaction is projected to yield mid-single-digit cash earnings per share in the first year following its completion.

"The Board of Directors finds that the offer from Deutsche Börse AG represents attractive value for the shareholders of SimCorp A/S," Peter Schütze, the Chair of the Board of Directors of SimCorp A/S, said.

"Deutsche Börse AG is well-positioned to contribute to the realization of the long-term potential of SimCorp A/S, and the offer is a clear testament to the strong position and prospects of SimCorp A/S in a global investment industry undergoing fundamental changes and seeing rising demand for integrated technology platforms."

Deutsche Börse Group Starts 2023 with Growth

In addition to information about the acquisition of SimCorp, the Group published its latest quarterly report for the last three months of 2023. It reveals that net revenues in this period increased 16% to EUR 1.231 billion and EBITDA 12% to EUR 772 million.

"Strong net revenue growth is due partly to secular growth of 7% and also to cyclical effects of 9%," Deutsche Börse commented in a statement.

The net profit attributable to shareholders was EUR 473 million, translating to an increase of 12% compared to last year's quarter. Before considering purchase price allocation, earnings per share amounted to EUR 2.70, which signifies a 13% increase.

The results are consistent with the report for the full year of 2022, in which Deutsche Börse's net profit increased 24% to EUR 1.6 billion. Additionally, the results for the fourth quarter were better than the same period a year ago. Net revenue rose to EUR 1.168 billion, which is a 25% increase compared to the previous year's €943 million, and net profit was €378 million.

In one of the latest updates, Deutsche Börse's crypto startup Crypto Finance AG announced its partnership with Apex Group, a financial services provider. The alliance aims to offer institutional-grade digital assets products.

Deutsche Börse Group, the operator of the German stock exchange , published two important updates on Thursday concerning the results for the first quarter of 2023 and the acquisition of SimCorp, a provider of investment management solutions.

In response to the latest reports, the company's shares on the German stock exchange (XETR: DB) are losing nearly 7% and falling to EUR 170, the lowest monthly level. On the other hand, SimCorp (CPH: SIM) is in the process of increasing by 38%.

Deutsche Börse Announces Acquisition and Launch of New Segment

Deutsche Börse AG announced a voluntary recommended public offer to acquire all shares (except for its own shares) of SimCorp A/S at 735.0 DKK per share in a transaction fully financed by debt. Thus, SimCorp A/S is valued at EUR 3.9 billion.

Parallel to the acquisition of SimCorp A/S, Deutsche Börse AG plans to merge its existing subsidiaries Qontigo and ISS, which deal with data and analysis, under one leadership. Upon completion of the offer, the merger of Qontigo and ISS and SimCorp A/S will be grouped within the newly created Investment Management Solutions segment to drive further growth, efficiency, and full crystallization of value.

"Both transactions will bring long-term growth, sizeable and tangible synergies, and a significant increase of our recurring revenues," Theodor Weimer, the CEO of Deutsche Börse AG, said. "We would be delighted to welcome SimCorp A/S, which has been a trusted business partner for many years, to Deutsche Börse Group and to embark on this exciting journey together."

After the offer is finalized, Deutsche Börse AG anticipates achieving annual EBITDA synergies of EUR 90 million within a span of three years. This includes EUR 55 million in cost synergies and EUR 35 million in revenue synergies. However, it's important to note that there will be a one-time cost of approximately EUR 100 million to attain these synergies.

Deutsche Börse's shares are falling to EUR 170, losing about 7% on Thursday. Meanwhile, shares of SimCorp listed on the Danish stock exchange are gaining nearly 40% and rising to DKK 732, which is the highest since January 2022.

DB shares (candlestick chart) and SIM shares (line chart). Source: Tradingview.com
DB shares (candlestick chart) and SIM shares (line chart). Source: Tradingview.com

Details of the Deutsche Börse Transaction

The offer price for SimCorp represents a premium of 38.9% and a premium of 45.3% compared to the closing price of 529.0 DKK and a 3-month volume-weighted average price of 505.7 DKK, respectively, as of 26 April 2023.

The Board of Directors at SimCorp A/S has unanimously decided to recommend shareholders of SimCorp A/S to accept the offer once it is made public. Based on anticipated annual synergies, the transaction is projected to yield mid-single-digit cash earnings per share in the first year following its completion.

"The Board of Directors finds that the offer from Deutsche Börse AG represents attractive value for the shareholders of SimCorp A/S," Peter Schütze, the Chair of the Board of Directors of SimCorp A/S, said.

"Deutsche Börse AG is well-positioned to contribute to the realization of the long-term potential of SimCorp A/S, and the offer is a clear testament to the strong position and prospects of SimCorp A/S in a global investment industry undergoing fundamental changes and seeing rising demand for integrated technology platforms."

Deutsche Börse Group Starts 2023 with Growth

In addition to information about the acquisition of SimCorp, the Group published its latest quarterly report for the last three months of 2023. It reveals that net revenues in this period increased 16% to EUR 1.231 billion and EBITDA 12% to EUR 772 million.

"Strong net revenue growth is due partly to secular growth of 7% and also to cyclical effects of 9%," Deutsche Börse commented in a statement.

The net profit attributable to shareholders was EUR 473 million, translating to an increase of 12% compared to last year's quarter. Before considering purchase price allocation, earnings per share amounted to EUR 2.70, which signifies a 13% increase.

The results are consistent with the report for the full year of 2022, in which Deutsche Börse's net profit increased 24% to EUR 1.6 billion. Additionally, the results for the fourth quarter were better than the same period a year ago. Net revenue rose to EUR 1.168 billion, which is a 25% increase compared to the previous year's €943 million, and net profit was €378 million.

In one of the latest updates, Deutsche Börse's crypto startup Crypto Finance AG announced its partnership with Apex Group, a financial services provider. The alliance aims to offer institutional-grade digital assets products.

About the Author: Damian Chmiel
Damian Chmiel
  • 1588 Articles
  • 35 Followers
About the Author: Damian Chmiel
Damian's adventure with financial markets began at the Cracow University of Economics, where he obtained his MA in finance and accounting. Starting from the retail trader perspective, he collaborated with brokerage houses and financial portals in Poland as an independent editor and content manager. His adventure with Finance Magnates began in 2016, where he is working as a business intelligence analyst.
  • 1588 Articles
  • 35 Followers

More from the Author

Institutional FX

!"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|} !"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|}