CBOE to Enter FX Markets via $3.2b BATS Global Markets Acquisition

The Chicago based firm will acquire Hotspot as part of the deal.

The Chicago Board Options Exchange Holdings (NASDAQ: CBOE), one of the largest operators of the US equity options market, has entered into a definitive agreement with Bats Global Markets, Inc. (Bats: BATS) to acquire the group in a deal worth upwards of $3.2 billion, according to a CBOE statement.

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A possible acquisition had been rumored last week with CBOE making a bid to enter FX markets with a landmark deal. The agreement has already been approved by the respective boards of directors in both CBOE and Bats, with the deal valued at roughly $32.50 per Bats share, or $3.2 billion.

In particular, this corresponds to consisting of 31% cash and 69% CBOE Holdings stock, based on CBOE Holdings’ closing stock price of $70.30 per share on September 23, 2016. At the time of writing however, both companies’ shareprices have risen on the announcement, with CBOE climbing to $71.63 (up 1.89%) ahead of the US open Monday.

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FX in Focus

The deal is important for CBOE as it looks to make a splash in the foreign exchange (FX) space, tapping into one of the largest exchange operators currently serving the market. While dealing with equities, derivatives, and exchange-traded-funds (ETFs), Bats also is a significant FX player via a previous Hotspot acquisition of its own.

The new deal will aim to broadly expand CBOE Holdings’ product line across asset classes, including Bats’ European equities and global FX positions. Ultimately, CBOE Holdings will also be leveraging Bats’ leading proprietary trading technology by migrating trading in all of the group’s markets onto a unified platform.

According to Edward T. Tilly, CBOE Holdings’ Chief Executive Officer (CEO), in a recent statement on the deal: “The acquisition of Bats is expected to strengthen our position as a global leader in innovative tradable products and services, and is a transformative next step in our growth strategy.”

“We believe that bringing together CBOE Holdings’ product innovation, indexing expertise, and options and volatility market position, with Bats’ proven proprietary technology infrastructure, global ETP listing and trading venues, global foreign exchange marketplace and market data services, represents a compelling combination that should deliver significant benefits for our customers and enhanced long-term value for our stockholders.”

“In particular, we believe the complementary nature of our respective offerings uniquely positions the combined company to provide the product set, transparency and tradability demanded by the rapidly-developing index-based investing market. Further, Bats’ market data expertise will allow CBOE Holdings to develop new products using the company’s index calculation capabilities,” he reiterated.

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