CBOE to buy Bats: Finally pulls trigger on acquisitions

September 26, 2016 12:15 PM

Throughout the analyst call with CBOE Holdings and Bats regarding today’s announced acquisition of Bats by CBOE there were references to CBOE’s reluctance to enter the mergers and acquisition space, but it turns out they were just looking for the right partner.

Apparently they have found that partner as both CBOE CEO Ed Tilly — who will remain in that position after the deal closes — and Bats CEO Chris Concannon — who will be president and COO of the combined company — talked about their complementary product offerings and huge synergies the proposed acquisition would create.

Tilly said that when asked about transaction in the past he laid down specific criteria. “I always said that we would look for a company with products and services that would be complementary to our own, but also with margin and growth potential similar to CBOE’s; in other words a company that looked a lot like Bats.”

See transaction summary here

Concannon added, “This transaction offers our stockholders immediate cash value and allows us the opportunity to continue our great growth trajectory by combining with another market innovator in CBOE.”

The definitive agreement, which was reached by a unanimous vote of both boards and is estimated to be completed sometime in the second half of 2017, is valued at approximately $32.50 per Bats share (or $3.2 billion) consisting of 31% cash and 69% CBOE Holdings stock, based on CBOE Holdings’ Sept. 23 closing stock price of $70.30.

Hear presentation to analysts

Prior to the announcement, research firm Keefe, Bruyette & Woods Inc. (KBW) downgraded Bats from outperform to market perform based on the 20% spike in value following initial reports of a potential acquisition on Friday (see chart below).

KBW, in its report, noted that there is a low probability of a competing bid to CBOE for Bats by an exchange operator. The most likely to compete, according to KBW, would be the Intercontinental Exchange or NDAX, but a bid by either exchange would likely create anti-trust challenges.


About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.