Intntl Sec Exchange (NYSE:ISE)
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Eurex and International Securities Exchange (ISE) announced today that
they have signed a definitive agreement under which Eurex will acquire
ISE for approximately USD 2.8 billion in cash, or USD 67.50 per share.
The combination will be implemented by way of a merger and is subject to
approval by the holders of a simple majority (50 percent plus one share)
of ISE outstanding common stock at a special shareholder meeting to be
held as soon as practicable, receipt of regulatory approval by the U.S.
Securities and Exchange Commission and other customary closing
conditions. ISE’s Board of Directors
recommends to shareholders to vote in favor of the transaction.
The transaction will create the largest transatlantic derivatives
marketplace with significant USD and Euro product coverage and with
significant operations and revenues in both the U.S. and Europe, the two
largest markets based on market capitalization. It will further
strengthen Eurex’s position as the leading
global derivatives marketplace and will create the undisputed market
leader in individual equity, equity index and interest rate derivatives
worldwide with a combined overall trading volume of 2.1 billion
contracts in 2006. Eurex’s and ISE’s
complementary member bases and product portfolios provide significant
growth opportunities across asset classes and national boundaries.
Further upside potential stems from joint product and business
development opportunities. ISE will continue to operate as a separate
entity under SEC regulation in its current governance structure and
under the ISE brand. ISE’s full management
intend to remain in their positions.
Deutsche Boerse CEO Reto Francioni said: “This
transaction further expands Deutsche Boerse’s
leading position in the fast growing global derivatives markets. The
agreement is a strategic milestone for us that will further fuel our
strong growth prospects and create significant value for shareholders.
This transaction underscores our approach to combine strong organic
growth with value creating acquisitions.”
“ISE and Eurex are partners with an excellent
strategic fit. Both are innovators of electronic trading in their time
zone, sharing the same management culture. We look forward to combining
our strengths to create a global marketplace,”
said Andreas Preuss, CEO of Eurex and a member of the executive
board of Deutsche Boerse. “The combination of
ISE’s leadership position in the U.S. equity
options market with Eurex’s global position
in Euro denominated fixed income, index and equity derivatives will
provide significant benefits to our customers.”
“In founding ISE almost 10 years ago, we
transformed the U.S. options market,” said David
Krell, President and CEO of ISE. “Our
innovative products, electronic trading model, technology, market
structure and entrepreneurial organization have enabled us to remain at
the forefront of the options industry. Our principle strategic objective
is to further grow our business both in terms of new products and new
markets and in partnering with Eurex, we will be able to achieve our
goal. By completing this transaction, we will be positioned to build
upon ISE’s successful business model and to
solidify our future as an integral component of the largest
transatlantic derivatives marketplace.”
Gary Katz, Chief Operating Officer of ISE, added, “We
have known the management team of Eurex for some time now and have
developed a strong working relationship with them. We also share a
common vision that the exchange model is evolving toward global,
multi-asset class, electronic marketplaces and our combination will
allow both of our organizations to remain at the forefront of this
competitive industry. Our cultural fit and common vision will serve as
the basis for our successful future collaboration.”
“Our contribution to the ISE acquisition
demonstrates the SWX Group’s strategic
commitment to leveraging and expanding its international partnerships,"
said Peter Gomez, Chairman of the SWX Group.
Jürg Spillmann, Head of the SWX Group
Executive Committee and Deputy CEO of Eurex added: "The expansion of the
combined liquidity network of the fully electronic exchanges Eurex and
ISE will further enhance the leadership position by our joining forces.”
ISE is the world’s largest equity options
exchange, providing electronic trading in USD denominated equity
options, index options and FX options. ISE’s
trading volume in equity options has grown at a 55 percent CAGR over the
last five years, outperforming the market for U.S. equity options. With
a share of 32 percent of the overall U.S. equity options market, ISE is
the market leader. ISE traded 600 million contracts in 2006 and has 164
member firms in the U.S. ISE recently launched a stock exchange and
operates an alternative markets platform, which will be further enhanced
as part of the Eurex group.
Eurex, jointly owned by Deutsche Boerse and SWX Swiss Exchange, has a
diversified portfolio of Euro denominated fixed income, index and equity
derivatives. Since its inception in 1998 Eurex has grown to become the
largest derivatives market in the world. Eurex lists some of the world’s
most actively traded derivatives, including the global benchmark
products Euro Bund future and Dow Jones Euro STOXX 50 future. Eurex has
393 members in Europe, the US and Asia and traded 1.53 billion contracts
in 2006.
Compelling strategic rationale for the transaction
The merger of Eurex and ISE combines two of the fastest growing players
in the financial services industry, both with proven track records of
innovation. ISE pioneered electronic trading in the fast growing U.S.
equity options market and continues to show strong, positive financial
performance on the back of market leadership in the U.S.
ISE’s extensive membership base will
significantly strengthen Eurex’s position in
the U.S.: 164 registered U.S. broker-dealers are ISE members while Eurex
currently has 63 U.S. members. It also adds 600 million traded contracts
to the number of contracts originated in the U.S.; at Eurex, 112 million
contracts originated in the U.S. ISE’s
product portfolio is fully complementary to that of Eurex and with the
acquisition Eurex is investing in a high growth business while further
balancing its product portfolio.
The combined group will be the largest transatlantic derivatives
marketplace with powerful distribution capabilities in two of the world’s
most important capital markets. Its wide range of both USD and Euro
denominated products will be unique in the market: the combination will
be home to the Euro zone interest rate and equity index benchmark
derivatives products and will offer options on all major U.S. and
European companies. Combining the two companies offers huge growth
opportunities through cross selling of existing products in both
markets, as well as through the introduction of new products in the
future.
The combination will create significant value for Deutsche Boerse
shareholders and SWX Swiss Exchange. Total estimated pre-tax synergies
of USD 50 million p.a. have already been quantified. 50% of the total
synergies will be achieved in 2010 and full run rate synergies in 2012.
Of the total some USD 15 million p.a. are attributable to efficiency
gains. An additional approximately USD 35 million p.a. come from revenue
synergies mainly through the cross selling of existing products. Both
partners strongly believe that the joint product development experience
and capability will result in further growth opportunities across asset
classes and geographies. This additional potential is not included in
the total synergies.
The combination is well positioned to further expand its global network
of partners. It will feature the broadest geographic and product
coverage, strong functional and service knowledge and cutting-edge
technology.
Transaction structure
In the merger, Eurex will pay ISE shareholders USD 67.50 in cash for
each of their shares of ISE stock. The combination will be implemented
by way of a merger between ISE and a subsidiary of U.S. Exchange
Holdings Inc., itself a Eurex subsidiary. The transaction is subject to
approval by the holders of a simple majority (50 percent plus one share)
of ISE outstanding common stock at a special shareholder meeting to be
held as soon as practicable, receipt of regulatory approval by the U.S.
Securities and Exchange Commission and other customary closing
conditions. The partners expect the transaction to close in Q4/2007. ISE
expects to continue to pay a regular quarterly cash dividend in the
pre-closing period.
Eurex will be the acquiring entity with its two parent companies
Deutsche Boerse AG and SWX Swiss Exchange providing the necessary
financing. Deutsche Boerse will contribute 85% of the total purchase
price and SWX 15% thereby remaining in line with the economic interests
that both companies have in Eurex.
Deutsche Boerse is planning to finance its share of the purchase price
initially through a bridge loan facility of approximately EUR 1.5
billion (approx. USD 2 billion) and cash on hand at the time of closing.
This bridge loan will be taken out through retention of future earnings
of approximately EUR 200 million (approx. USD 270 million) and a mix of
senior and hybrid debt (approximately EUR 1.3 billion, approx. USD 1.77
billion). This long term financing structure assumes implementation of
the ringfencing structure currently under development as reported at the
annual results conference in February 2007. With this structure Deutsche
Boerse moves from a net cash to a net debt position thereby reducing its
cost of capital and thus increasing its capital efficiency. Deutsche
Boerse also plans to continue with its progressive dividend policy.
Share buy backs under its current capital management program will start
again once financial ratios are restored.
Editor's Note:
Eurex and ISE will hold a joint briefing for the media
Tuesday, 1 May 2007
8:30 am - 10:00 am (EST)
Location: Waldorf Astoria Hotel
301 Park Avenue
New York, NY 10022
Empire Room
For journalists not able to attend in person, we have arranged
for a teleconference line.
Teleconference call: +1-800-7 98 28 01 (USA)
+1-617-6 14 62 05 (International)
Passcode 18 10 86 81
Presentation materials for the briefing will be available in the
investor relations sections at www.deutsche-boerse.com
and www.iseoptions.com. A replay
of the teleconference call will be available from 10:30 am on May 1,
2007 until May 8, 2007 and can be accessed by calling +1-888-286-8010
(USA) or +1-617-801-6888 (International) and providing the participant
passcode 38291262.
Eurex and ISE will hold a conference call for investors/analysts
Tuesday, 1 May 2007
10:30 am - 12:00 am (EST)
Teleconference call: 800-2 37 97 52 (USA)
+1-617-8 47 87 06 (International)
Passcode 82 77 41 37
Presentation materials for the conference call will be available
in the investor relations sections at www.deutsche-boerse.com
and www.iseoptions.com. A replay
of the teleconference call will be available from 12:30 pm on May 1,
2007 until May 8, 2007 and can be accessed by calling +1-888-286-8010
(USA) or +1-617-801-6888 (International) and providing the participant
passcode 42770087.
About Deutsche Boerse
Deutsche Boerse, a member of the German blue chip index DAX®
and the largest exchange organization worldwide, is a leading service
provider to the global securities industry with products and services
for issuers, investors, intermediaries and data vendors. The Group
covers the entire securities process chain from trading over clearing
all the way to settlement and custody. Deutsche Boerse Group is also a
provider of IT solutions and an insourcing partner for the global
securities industry as well as a leading provider of market data and
analytics.
Within the Group, Deutsche Boerse AG functions as the operating company
for the various markets and as the holding company for Deutsche Boerse
Systems AG, the Group's IT arm as well as Clearstream International
S.A., the settlement and custody operation.
The Group’s major markets are the Frankfurt
Stock Exchange and the world’s leading
derivatives exchange Eurex. The company’s
global network connects over 2,000 banks, securities trading firms and
clearing and settlement firms worldwide to these markets.
Deutsche Boerse AG is listed on the Frankfurt Stock Exchange and has an
international shareholder base. The group employs around 3.000 staff in
its global headquarters in Frankfurt as well as in Chicago, London,
Luxembourg and Zurich; the Group maintains representative offices in the
major financial centers worldwide.
About Eurex
Eurex, jointly owned and operated by Deutsche Boerse AG and SWX Swiss
Exchange, is the world's largest derivatives exchange. Eurex offers a
broad range of international benchmark products and operates the most
liquid fixed income derivatives markets in the world. With market
participants connected from locations all over the world, trading volume
at Eurex reached 1.53 billion contracts in 2006.
In addition to operating a fully electronic trading platform, Eurex
provides an automated and integrated joint clearing house, Eurex
Clearing. Together with international trading houses, Eurex also
operates the electronic network (ECN) Eurex Bonds, an over-the-counter
market for integrated cash and derivatives trading in German Federal
bonds and Eurex Repo, the electronic trading solution for sale and
repurchase agreements. Together with Man Group plc, Eurex owns U.S.
Futures Exchange, aimed at expand the derivatives market by serving as a
product incubator and innovator to create new listed products.
About ISE
International Securities Exchange Holdings, Inc. (NYSE: ISE), through
its subsidiaries, operates a family of innovative securities markets.
ISE is founded on the principle that technology and competition create
better, more efficient markets for investors and consists of an options
exchange, a stock exchange and an alternative markets platform. ISE
continually enhances its trading systems and develops new products to
provide investors with the best marketplace and investment tools to
trade smarter.
ISE developed a unique market structure for advanced screen-based
trading systems and in May 2000 launched the first fully electronic US
options exchange. Currently, ISE operates the largest U.S. equity
options exchange and is among the leading options exchanges in the
world. ISE offers index options, including a portfolio of proprietary
index products, and enhanced market data products for sophisticated
investors. ISE FX Options™ launched in the
second quarter of 2007.
ISE Stock Exchange, launched in September 2006 with strategic partners,
includes an innovative MidPoint Match™
platform which offers investors continuous price improvement. MidPoint
Match was integrated with a fully displayed Best Bid Offer market in the
fourth quarter of 2006.
ISE’s alternative markets business currently
consists of an events market trading platform known as Longitude.
Longitude’s patented and proprietary
technology provides a unique parimutuel structure for derivatives
auctions which results in greater trading and pricing flexibility for
market participants.
About SWX Swiss Exchange
The SWX Swiss Exchange, a part of the SWX Group (a provider of
securities exchange services), is one of the world’s
leading and most technologically advanced securities exchanges. The
fully automated trading, clearing and settlement system remains unique
in the world. At the click of a mouse, an order is executed, cleared,
paid for and confirmed – all within the space
of 2 minutes, with an average of 2.3 million transactions each trading
day. The SWX Swiss Exchange offers its customers first-rate securities
exchange services and a broad range of investment products.
www.swx.com
LEGAL DISCLAIMER
Proxy Statement
ISE plans to file with the SEC and mail to its stockholders a Proxy
Statement in connection with a special meeting of stockholders to be
called to approve the merger. The Proxy Statement will contain important
information about ISE, the transaction and related matters. Investors
and security holders are urged to read the Proxy Statement carefully
when it is available. Investors and security holders will be able to
obtain free copies of the Proxy Statement and other documents filed with
the SEC by ISE through the web site maintained by the SEC at www.sec.gov.
In addition, investors and security holders will be able to obtain free
copies of the Proxy Statement from ISE by contacting Thomas Gibbons of
ISE at 60 Broad Street, New York, NY 10004, Telephone (212) 897-8167.
Participants in the Solicitation
ISE and its executive officers and directors may be deemed, under SEC
rules, to be participants in the solicitation of proxies from ISE's
stockholders with respect to the proposed merger. Information regarding
the executive officers and directors of ISE is included in ISE's
definitive Proxy Statement for ISE's 2007 annual meeting, which was
filed with the SEC on April 3, 2007. More detailed information regarding
the identity of potential participants, and their direct or indirect
interests, by securities, holdings or otherwise, will be set forth in
the Proxy Statement to be filed by ISE with the SEC in connection with
the proposed merger.
Forward-looking Statements
Certain matters discussed in this press release are "forward looking
statements" intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995.
These statements relate to future events or future financial
performance, and involve known and unknown risks, uncertainties and
other factors that may cause the actual results, levels of activity,
performance or achievements, to be materially different from those
contemplated by the forward looking statements. For example, (i) ISE may
be unable to obtain the stockholder approval required for the merger,
(ii) the regulatory approvals, including SEC approval, required for the
merger may not be obtained and (iii) conditions to the closing of the
merger may not be satisfied. In addition, additional factors that could
affect ISE's results, levels of activity, performance or achievements
and cause them to materially differ from those contained in the forward
looking statements can be found in ISE's filings with the Securities and
Exchange Commission, including ISE's annual report on Form 10-K, current
reports on Form 8-K and quarterly reports on Form 10-Q. ISE undertakes
no ongoing obligation, other than that imposed by law, to update these
statements.