Regular readers will know I am unsurprised to read reports of Blackstone pondering the sale of FXall once it completes its takeover of a majority stake in Thomson Reuters F&R, because (for once, I know, before you all message me) I predicted such a thing in this column in June.
What I find interesting in the latest production from the rumour mill is how it is only the sale of FXall – Matching and the other channels are not mentioned. Given the effort and resources spent on creating FXT at Thomson Reuters – which, I have to say has not been a total success to date – it seems strange to break it up again by selling part of it. Surely there must be some costs involved, and if there are, surely this would reduce the value of any deal?
I also think a deal for FXall alone would be a strange thing for a buyer to accept. I discussed the various buyers in the aforementioned column (and the buzz around a Deutsche Boerse bid gets stronger by the week almost), and almost all would immediately be established a rival in some shape or form for the platforms left behind at the newly-renamed Refinitiv. That means the intelligence and data from the FXall database would still be there, you can’t wipe peoples’ memories, and an immediater competitor is established and in place.
Another important factor is that one of the real attractions of the Thomson Reuters’ FX platform business is its global footprint – it is in places others just have not, and in some cases cannot, reach. Why forego that by buying a piece of the business that would take time and money to extricate?
Of course, there is one inconvenient factor that could dictate a sale of just FXall – the price. The Bloomberg News report cites a $3 billion price tag for a firm bought for $620 million less than a decade ago, but a deal for the entire business, especially with that global footprint, would be come at a considerably steeper price. Personally I think Deutsche Boerse would still see the value and may find itself in competition with another group like ICE (although the latter has shown itself reluctant in the past to get into a bidding war for a platform).
Either way, as the date nears at which the Refinitiv changeover happens, it is inevitable that speculation over the future of the trading businesses heightens. I have repeatedly said that I see a deal happening at some stage; but (and here’s where I leave myself horribly exposed) I don’t see it being for just a part of the platform business. That seems illogical.
Taking Deutsche Boerse as an example, both it and FXall have strong buy side franchises (different geographical strengths I would suggest) but even after the acquisition of GTX I am not sure how easily it leverages its franchise among the major dealers and hedge funds. That comes with Matching and the other channels – as does, as previously noted, the geographical strength an exchange group would truly crave.
So a deal? Yes, I think it inevitable. For only one piece of the platform? I am not sure there is any real rationality for such a deal for either buyer or seller.