Pan-European multilateral trading facility (MTF) Chi-X Europe has received a letter of enquiry from a privately-owned firm that could lead to an offer to purchase.
The firm issued a statement to confirm that it had received an enquiry “from a third party, which may or may not lead to an offer for the whole or partial sale of the company”.
Launched by agency broker Instinet in March 2007, Chi-X Europe currently trades around 1,200 of the most liquid securities across 15 major European markets and, unlike a number of rivals, claims to have achieved profitability so far in 2010. The firm traded €482 billion of European stocks in Q2 2010 and reported taking a 27.6% share of trading in FTSE 100 stocks, 21.1% of the CAC 40 and 20.2% of the DAX 30. According to data vendor Thomson Reuters, Chi-X Europe accounted for 17.25% of the European share market by turnover by June 2010, making it one of the leading exchanges in the region. From 3 September, the London-based MTF aims to offer trading in 50 international depository receipts from firms listed in 12 countries.
Chi-X Europe's board, which includes representatives from a number of the firm's 16 shareholders, met on Monday, 23 August to discuss the enquiry, which was received over the weekend. Members of staff were informed of the situation in the afternoon. Although Instinet retains the largest single stake in the firm, around 34%, Chi-X Europe's ownership base has diversified to include many of the venue's most active trading members, from global investment banks to proprietary trading firms such as Optiver.
The potential bid is believed to have come from a “non-listed firm”, which rules out most large exchange groups. Lower-than-expected trading volumes in Europe since the collapse of Lehman Brothers in Q3 2008 have undermined the business models of a number of Chi-X's peers, leading to a period of consolidation among trading venues. The London Stock Exchange Group completed the acquisition of Chi-X's rival MTF Turquoise in Q1 2010, for example, while NYSE Euronext incorporated Euro Millennium, a pan-European dark pool, into its Smartpool MTF in Q4 2009 following the group's purchase of NYFIX, a US-owned technology and execution services provider.
“Any future offer must be examined and assessed to ensure that it fully values the company and also we must take into consideration the strategic interests of shareholders/stakeholders,” said John Woodman, chairman of Chi-X Europe.
“This interest in Chi-X Europe is a result of our track record in becoming a major European exchange over the last three years and our move into profitability in 2010.
We were not seeking a transaction and the option of remaining independent would allow us to build further value for shareholders,” he added.
Chi-X Europe is expected to appoint a bank to advise on the potential takeover and to establish a valuation. Although no exchanges contacted on Monday night were available for comment, counterbids cannot be ruled out at this stage.