CME Group Bridges Cash, OTC, Futures Marketplaces with Takeover of NEX

Less than twenty-four hours after a by CME Group (Nasdaq: CME) of NEX Group was announced, the two sides have reached an agreement. The landmark deal will see CME Group acquiring NEX in a transaction valued at £10.0 per share, per a group statement.

The acquisition is valued at £10.0 per share, consisting of 500 pence in cash and 0.0444 CME Group shares. Despite weeks of speculation, a deal has now been agreed upon, with the transaction now approved unanimously by the boards of directors from both CME Group and NEX.

Moving forward, the deal is expected to close in H2 2018, pending the requisite regulatory and shareholder approvals. NEX Group shareholders will be entitled to receive 500 pence for each NEX share, along with 0.0444 shares of CME Group Class A common stock. This was derived from CME Group’s closing share price of $158.84 on March 28, 2018.

CME Group Chairman and Chief Executive Officer Terry Duffy, commented on the deal: “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. As one organization, we will be able to employ the complementary strengths of each company to serve a wider client base while diversifying our combined businesses across futures, cash and OTC products and post-trade services.”

How will clients benefit?

The transaction will also look to foster increased benefits for clients on a global basis. This includes trading and post-trading service benefits, as well as new trading opportunities across cash, futures and over-the-counter (OTC) marketplaces.

A takeover of NEX by CME will also seek to facilitate a greater level of efficiency and risk management services via clearing and post-trade services. This will emphasize listed, cleared OTC, and bilateral OTC marketplaces. The accord will also help create over time, new fixed income opportunities as clients look to better manage risk as the Fed unwinds its balance sheet and the US budget deficit grows.

“Michael Spencer and his senior leadership team have built a world-class organization that is at the center of capital markets. We are committed to maintaining the longstanding relationships NEX has with its clients, and exchange and clearing house partners. Building on NEX’s deep roots in Europe and Asia and CME’s strong technology platform, we will transform our international profile and broaden our distribution network in spot and futures FX products as well as cash, repo and futures products in U.S. Treasuries,” Mr. Duffy added.

Of note, CME group expects new trading opportunities to arise in an FX marketplace – the return of market volatility has played a large factor, while global GDP growth and a shift towards electronification of FX trading globally are also determinants. Finally, the acquisition of NEX will help scales and streamline its compression, reconciliation and processing services.

NEX CEO to step into new role

Pending the completion of the acquisition, NEX’s CEO Michael Spencer is slated to join the CME Group Board of Directors. In this capacity, he will remain with the newly combined entity in the role as Special Adviser. He will be tasked with helping oversee the ongoing evolution of NEX’s businesses, while also working with regulators and officials in Asia and the Europe, Middle East, and Africa (EMEA) region.

“The combination of NEX and CME 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.  The technology and innovation opportunities will be diverse and extraordinary. Clients will be better served,” reiterated Mr. Spencer.

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