Exchange operator The Nasdaq OMX Group Inc. (NDAQ), Monday agreed to acquire the eSpeed platform business from BGC Partners Inc. (BGCP) in a deal valued about $1.23 billion. eSpeed is an on-the-run, U.S. Treasury fully electronic trading platform, which is expected to help Nasdaq diversify into the electronic fixed income business.
Shares of BGC Partners surged more than 40 percent in after-hours trade, on the news.
As per the terms, Nasdaq will pay $750 million in cash plus an earn-out payment of up to $484 million of NASDAQ common stock to be paid ratably over 15 years.
Nasdaq believes the deal will be accretive to its earnings within the first twelve months after closing, excluding transaction-related costs, and generate attractive returns on capital. The deal is expected to close sometime mid-2013.
"We view the eSpeed platform as a compelling extension of NASDAQ OMX's strategic direction as eSpeed is a major player in the U.S. Treasury market...," said Bob Greifeld, chief executive officer of NASDAQ.
Nasdaq expects strong growth in U.S. Treasury volumes due mainly to stability in the issuance of new Treasuries, the continued electronification of the U.S. Treasury market, and the resolution of fiscal uncertainty.
BGC will sell to NASDAQ OMX certain assets, including the eSpeed brand and contracts comprising the fully electronic portion of BGC's benchmark, on-the-run, U.S. Treasury brokerage, market data and co-location service businesses. These assets generated revenues of about $100 million in 2012. eSpeed will be a part of Nasdaq's Transaction Services business.
BGC has agreed not to compete with NASDAQ OMX in fully electronic, on-the-run, benchmark U.S. Treasury Notes and Bonds for 3 years following the close of the deal. BGC will retain all of its other voice, hybrid, and fully electronic trading, market data, and software businesses.
BGC said the one-time gain related to the $750 million payment is expected to be accretive to its net earnings per share upon closing, but will not be included in the company's results for distributable earnings.
Shares of Nasdaq closed Monday at $32.01, down 0.90%.
BGC Partners closed at $3.85, down 7.45%, on a volume of 2.7 million shares. In after hours, the stock gained $1.65 or 42.86%.
by RTT Staff Writer
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