CBOE Agrees to Buy Bats for $3.2 Billion

The operator of the largest US options exchange looks to expand on offerings and global reach with purchase.


In separate votes, members of each exchange's board of directors unanimously voted in favor of the merger. The deal will be a cash and stock transaction, consisting of 31 percent cash and 69 percent CBOE stock, based on its closing price of $70.30 per share on Sept. 23.

The deal will allow CBOE Holdings to expand on its product line in all asset classes and tap into Bats' foothold in pan-European equities and global foreign exchange (FX) positions. CBOE will also be able to move into non-transactional revenue streams via Bats' market data offerings.

Upon the closing of the deal, which is expected to take place in the first half of 2017, Bats' proprietary trading technology will be used to migrate all trading in the combined company's markets onto a single platform.

"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," said Edward Tilly, CBOE Holdings' CEO, in a statement. "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."

C-Level Shakeup

Tilly will remain the CEO of the combined company. Chris Concannon, Bats CEO, will transition to president and chief operation officer, taking over for Edward Provost, CBOE Holdings president and COO, who will retire. Chris Isaacson, Bats chief information officer (CIO), will succeed Gerald O'Connell, CBOE Holdings current CIO, who will also retire.

The board of directors of the company following the closing will consist of 14 members, with 11 coming from CBOE Holdings' current board and three from Bats'. CBOE will borrow $1.65 billion to fund the deal.

CBOE anticipates realizing $50 million in annualized expense synergies within three years of the completion of the transaction. That number is expected to rise to roughly $65 million within five years of closing.

"CBOE Holdings and Bats share a culture based on the goal of efficiently utilizing innovation to better serve customers and the broader marketplace while enhancing stockholder value," Tilly said. "We expect the acquisition to enhance the trading experience by streamlining access for customers and to allow CBOE Holdings to provide greater scale, while significantly increasing operational and cost efficiencies."


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