UPDATED: Nasdaq to buy Cinnober in $190 million deal

Nasdaq makes acquisition play for Swedish technology provider to build out the technology and analytics capabilities of its Market Technology business.

Nasdaq has submitted a bid to acquire Swedish exchange and clearing technology provider Cinnober in a deal worth $190 million.

The US exchange group has made an all-cash public recommended offer to the shareholders of Cinnober in order to strengthen its Market Technology business which serves a range of capital markets participants.

Speaking to The TRADE, Lars Ottersgard, EVP and head of Market Technology at Nasdaq, explained that the deal is aimed at building out the historic strengths of the two businesses.

“We have had good traction for many years for Market Technology, which has been growing steadily through the years. We have seen an uptake in interest in our capabilities to deliver solutions both to the wider capital markets and into new marketplaces,” he said.

“Cinnober has very common capabilities as we do in many spaces. Our biggest inhibitor for growth has been the capacity to deliver and support clients, and together we can grow much faster than as two isolated entities.”

Cinnober currently provides a portfolio of exchange and clearing solutions, and recently ventured into the cryptocurrency space through a partnership with BitGo, a cryptocurrency security specialist, to provide technology solutions to crypto exchange operators to handle increasing trading volumes.

“It’s too early for us to talk about how we would position the different product lines,” said Ottersgard. “To some extent there is some overlap of solutions, but in many areas we have a totally complimentary portfolio of solutions. We will need evaluate what the best-of-breeds and decide what is the best way forward.”

Stockholm-based Cinnober was established in 1998 and has diversified its technology offering since its inception through a number of acquisitions of its own, including the purchase of market surveillance technology provider Ancoa in May last year.

However, the Swedish vendor has struggled financially in recent years, posting a loss of SEK93 million in 2017, with a raft of senior executives having departed, including Veronica Augustsson, who had served at the helm of Cinnober’s since 2012.

The acquisition bid from Nasdaq comes just one month after Cinnober announced its CFO and former RBC Capital Markets analyst Peter K. Lenardos had been selected as Augustsson’s replacement as Group CEO.

The deal is expected to close in the fourth quarter of 2018 and the Cinnober board has unanimously recommended that shareholders and warrant holders accept the offer.

“I really believe in the strategic logic of combining Cinnober and Nasdaq’s Market Technology business also as it reinforces the strong technology foundation in Sweden,” said Nils-Robert Persson, co-founder and Chairman of the Board of Directors of Cinnober. “As the largest shareholder of Cinnober, I am supportive of the offer and intend to accept the offer.”

The deal is the latest in a series of acquisitions so far this year, with market vendor consolidation showing no signs of slowing down.

In July, State Street announced it is to acquire investment management front office service provider Charles River Development in a landmark $2.6 billion deal, which was swiftly followed by US technology giant SS&C announcing a similar deal for Eze Software for $1.45 billion.

The biggest deal of the year in the exchange space came in March, when US futures exchange operator CME and UK FinTech powerhouse NEX Group reached an agreement which will see CME acquire NEX for £3.9 billion.