February 9, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: CBOE Holdings (Nasdaq: CBOE ) popped 12.7% in intraday trading today as investors digesting news of a merger deal between rival securities exchanges, as well as announced discussions of a second potential merger in the sector, speculated that the Chicago Board Options Exchange might also be a takeover target.
So what: The London Stock Exchange Group (LSE: LSE-L ) announced an agreement to buy TMX Group (TSX: X), the parent of the Toronto Stock Exchange. In addition, NYSE Euronext (NYSE: NYX ) and Deutsche Boerse AG (DPW: GR) disclosed discussions about combining their businesses.
Now what: TMX Group shareholders will get 2.99 London Stock Exchange Group shares for each TMX Group share, giving TMX a value of C$42.68 a share at yesterday's closing price ... a paltry 6% premium. Mergers among exchanges are likely to continue as players seek clout and economies of scale, but there is not an obvious buyer for the Chicago Board Options Exchange. In addition, the CBOE, which went public last June, has been losing market share. At a P/E ratio of 52.1 times, the stock is not cheap and the opportunity for more upside from a takeover seems limited.
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