Eurex announced late last week that it had completed the acquisition of the International Securities Exchange (ISE). The news followed approval of the purchase by the Securities and Exchange Commission (SEC), the US regulator.
The exchange will continue to be regulated by the SEC as a registered national securities exchange and will operate under the existing management team as an independent subsidiary of Eurex. Eurex CEO Andreas Preuss will join ISE’s Board of Directors.
"We have successfully completed a transaction which will expand Deutsche Börse's leading position in the fast and steadily growing global derivatives markets,” says Deutsche Börse CEO Reto Francioni. “The acquisition will further fuel our strong growth prospects and create value for our shareholders.”
The aim of the merger is to expand Eurex’s global liquidity network into the U.S. and U.S. Dollar products. The Swiss-German derivatives group says complementary customer bases and product offerings provide ample cross-selling and product development opportunities, while allowing both Eurex and ISE to maintain their unique strengths.
“As part of Eurex, ISE will be poised to expand its reach internationally and to deliver the combined benefits of product innovation, technology leadership, and trading efficiencies to our members,” says ISE CEO David Krell. “At the same time, we are focused on continuing to provide the same high level of customer service and hands-on attention to our members to meet their specific trading needs.”
The first joint initiatives will be announced in early 2008. On a combined basis, Eurex and ISE will be the market leader in individual equity and equity index derivatives worldwide. Eurex says members of both exchanges will benefit from access to highly liquid products that span multiple asset classes and currencies.
“Our strategic vision is to organize markets globally,” explains Eurex CEO Andreas Preuss. “ISE has a very strong presence in the U.S. market and the combination is a significant step in expanding our global multi-asset class liquidity network. ISE will maintain a high level of self-responsibility as an independent market under the ISE brand and management, ensuring that the entrepreneurial spirit which has been the hallmark of ISE’s success to date will continue. Together we will leverage our combined distribution networks, know-how and innovation to address the specific needs of our respective marketplaces.”
ISE has experienced strong volume growth this year and is on track to outperform expectations. In November 2007, ISE’s average daily volume reached a new record of 4.3 million options contracts. Volumes year-to-date through November 2007 increased 35% to 741.6 million options contracts from 548.8 million contracts in the same period last year.
Eurex acquired ISE for approximately USD 2.8 billion in cash, or USD 67.50 per share. Eurex’s two parent companies, Deutsche Börse AG and SWX Swiss Exchange, provided the necessary financing in line with the economic interests of 85 and 15 percent, respectively, that both companies have in Eurex.
The combined group is the leading transatlantic operator of derivatives marketplaces with powerful distribution capabilities in two of the world's most important capital markets. Its wide range of both USD and Euro denominated products is unique in the market: the combination is home to the Euro zone interest rate and equity index benchmark derivatives products and offers options on all major U.S. and European companies. Currently, ISE and Eurex distribute their products to approximately 560 direct exchange members.
ISE COO and CEO-elect Gary Katz describes Eurex as “a partner with a strong cultural fit based on entrepreneurialism and efficiency. Our combination will build upon these values to lead the ongoing evolution of global exchanges.”
Peter Gomez, Chairman SWX Group and Chairman Eurex, added that SWX Group was pleased to be “opening another chapter in Eurex’s success story along with our partner Deutsche Börse. With the addition of ISE, we are delighted that Eurex is now the leading transatlantic marketplace in derivatives trading. We are also pleased to further expand SWX Group’s international operations while at the same time maintaining our strategic focus in our home market through consolidating the Swiss value chain.”