Cboe Global Markets to Acquire European Clearinghouse EuroCCP

The transaction is expected to be completed in the first half of 2020.

Cboe Global Markets, Inc. has confirmed this Tuesday that it has entered into a definitive agreement to acquire EuroCCP, a pan-European equities clearinghouse, as part of its efforts to expand into equities trading and clearing in Europe.

As Finance Magnates reported, reports surfaced that the US options exchange was considering to acquire EuroCCP, and was in talks with the clearinghouse as to how they would go about the transaction.

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According to a press release from Euronext, which is a minority stakeholder, Cboe and Euronext have entered into a binding agreement where the exchange will sell its 20 percent stake in EuroCCP to Cboe Global Markets, alongside the other current EuroCCP shareholders. Euronext expects to receive net proceeds of approximately €9 million (around $9.96 million) from the sale of its minority stake.

EuroCCP is equally owned by Cboe Europe, Euronext, Nasdaq, ABN AMRO Clearing Bank, and The Depository Trust & Clearing Corporation (DTCC).

Transaction expected to close in H1 of 2020

Following regulatory approval and the arrangement of a supporting liquidity facility at the EuroCCP clearing entity level, Cboe expects the acquisition to close in the first half of next year. The exchange holding company plans to fund the transaction with cash on hand. The size of the deal has not been disclosed.

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Commenting on the acquisition, Ed Tilly, Chairman, President and Chief Executive Officer of Cboe Global Markets said: “Cboe’s planned acquisition of a leading equities clearing house in Europe is an important step in our growth strategy for the region.”

“We believe ownership of EuroCCP will enhance our current European equities business, while providing opportunities to potentially diversify our business, including trading and clearing derivatives, in the future. We look forward to officially welcoming the EuroCCP team to Cboe Global Markets.” 

Cboe expects profits to drop post-acquisition

In the long-term, Cboe expects the acquisition to generate positive financial returns. However, over the next three to four years, the US options exchange expects the deal will dilute earnings. Specifically, the company warned that earnings per share are currently expected to be in the range of $0.08 to $0.10 for 2020 and 2021.

Furthermore, the company expects the investment will have the greatest negative impact in the first few years, as it will be during this period that it will ramp up its European derivatives trading and clearing and builds sufficient scale, the company said.

“As Europe’s leading pan-European equities clearing house, EuroCCP is essential to providing cost-effective clearing and trading competition in European capital markets that benefits all market participants,” added David Howson, Chief Operating Officer of Cboe Europe.

“We are committed to maintaining and extending these benefits to customers throughout the region. We are optimistic that we can further grow the EuroCCP business by leveraging our track record of innovation and strong customer relationships to create vibrant, efficient pan-European market infrastructure.” 

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