London Stock Exchange Group Plc (LSE.L), or LSE, Monday said it intends to create a new pan-European trading venture by merging its dark pools platform Baikal Global Limited with alternative trading platform Turquoise Trading Limited. The new venture, which will be owned 60% by LSE and 40% by the existing Turquoise shareholders, will continue to trade under the Turquoise name.
The new FSA regulated multilateral trading facility will expand LSE services across Europe in both lit and dark trading, and liquidity aggregation. LSE said it intends to broaden equity participation in the new venture by selling up to a further 9% of the issued share capital to other interested parties, while it will retain a majority shareholding.
As a neutral venue, Turquoise will be open to all market participants active in Europe. Exchange operated, the new venture will build upon Turquoise's existing pan-European lit order book and successful dark pool, as well as drawing upon Baikal's innovative product pipeline. LSE added that it will fully fund the cash needs of the new venture within an agreed framework for the first two year from completion, and intends to bring the business to sustainable profitability. Last year, Turquoise reported that losses before tax were £15.7 million and gross assets at the end of the last year were £11.0 million.
LSE said it will incur exceptional costs of up to £20 million in the current financial year, including write off of legacy technology costs, and restructuring and integration costs.
The company said the transaction is expected to be dilutive in terms of adjusted earnings per share in FY 2011, while the Turquoise and Baikal businesses are combined and developed, and positive from FY 2012.
The transaction will be effected through the acquisition by a newly-incorporated subsidiary of LSE of the existing Turquoise shareholders' interest in Turquoise. In consideration for the transaction, the existing Turquoise shareholders will receive 40% of the issued share capital in the new company, which will also become the holding company of Baikal. The transaction is expected to complete mid-February 2010.
Turquoise, a global investment banking clients of LSE, is owned by a consortium comprising Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, BofA Merrill Lynch, Morgan Stanley, UBS, BNP Paribas and Société Générale.
LSE is currently trading at 725 pence per share, up 1.04%, on the London Stock Exchange.
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