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ION Trading to Buy Rolfe & Nolan?

ION Trading, a Dublin-headquartered provider of trading software in the electronic fixed-income markets, is acquiring back office systems provider Rolfe & Nolan (R&N) for around £47 million, market sources tell Squawkbox.

UK-based Rolfe & Nolan provides trade processing and settlement systems in the futures and options markets, with a strong focus on the middle and back office. It is one of the main suppliers of exchange-traded derivatives software and its modular products include Margin Direct, Alerts Direct and Fees Direct, which have been taken by seven global investment banks and brokerage firms in recent months.

The company has been up for sale for more than a year, one market participant who looked at it tells Squawkbox. Five years ago, it went though a reported £15.3 million management buyout led by CEO Robert Freeman. The MBO was backed by HgCapital, a private equity group, which owns 77% of R&N.

Over the past 10 years R&N has courted acquisition offers from its main rival SunGard, which wanted to combine it with its GMI unit to give it an approximately 90% share of the market. This idea was soon scuppered when R&N clients took to the phones and complained to both the UK Office of Fair Trading and the US Department of Justice. In 2002, OnExchange, now part of The Clearing Corp., made a conditional indicative cash offer for the company but it was rejected by the R&N board.

The deal has come as a surprise to some market observers. While R&N is one of the main suppliers of exchange-traded derivatives software, ION Trading is firmly entrenched in the fixed-income arena.

Founded in 1999, ION Trading provides e-trading technology, risk management, pricing, and order management systems for fixed-income markets from offices globally.

Private equity firms TA Associates and Kairos Partners are investors in ION Trading, which is no stranger to acquisitions itself; in 2005 it acquired Aurora Software, a New York-based provider of front-office risk management solutions for US Treasuries and options trading desks. This was followed by the acquisition of Frankfurt-based Finvision Financial Systems, a provider of analytics and pricing for fixed-income securities. A year later it bought Anvil Software, a UK-based supplier of software for repo trading and securities lending.

The company has also aggressively built a 29% stake in derivatives trading systems provider Patsystems, which is listed on the Alternative Investment Market (AIM). With the private equity backing, ION Trading could presumably afford a strike for full control.

Observers say the R&N acquisition will allow ION to move into the whole transaction value chain, enabling it to provide straight-through processing in derivatives from the front end through to the middle office and back office.

Several calls to both companies asking for confirmation of the deal and comment were not returned by press time.

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