Deutsche Brse, through its Eurex joint venture with SWX Swiss Exchange, and the International Securities Exchange (ISE) have agreed to merge, creating what will be the largest trans-Atlantic derivatives exchange.
Deutsche Brse Eurex and ISE signed a definitive agreement last week under which Eurex will acquire ISE for approximately $2.8bn in cash, following board approvals. Deutsche Brse will contribute 85% of the total purchase price and SWX 15%, in line with the percentages that they have in Eurex.
The combined group will be the largest transatlantic derivatives marketplace, home to the Eurozone interest rate and equity index benchmark derivatives products and options on all major
ISE will continue to operate as a separate entity under Securities Exchange Commission regulation in its current governance structure and under the ISE brand with its full management remaining in their positions.
The exchanges expect the transaction to close in the fourth quarter of this year. In the merger, Eurex will pay ISE shareholders $67.50 in cash for each share of ISE stock.
The combined exchanges are expected to make pre-tax synergies of $50m per year, and half of total synergies will be achieved in 2010 and full run rate synergies in 2012. Of the total some $15m per year are attributable to efficiency gains with the remainder said to come from cross selling existing products.
ISE is the world’s largest equity options exchange, providing electronic trading in USD denominated equity options, index options and FX options. ISE traded 600m contracts in 2006; it recently launched a stock exchange and operates an alternative markets electronic trading platform. Eurex, already the largest derivatives market in the world, traded 1.53bn contracts of euro-denominated fixed income, index and equity derivatives in 2006.