Despite failed attempts to purchase the Euronext NV and the London Stock Exchange, Deutsche Boerse hasn't given up on its acquisitional ambitions. Yesterday, the German exchange made an eye-popping offer of $2.8 billion for International Securities Exchange Holdings
The object of Deutsche Boerse's interest has an unusual origin. In 1997, E*TRADE
Since its launch in May 2000, ISE has become the largest U.S. equity options exchange. Last year, its average trading volume was 2.4 million contracts per day. Revenue increased 29% to $202 million in fiscal 2006, while net income rose 56% to $55.1 million.
It's no wonder, then, that Deutsche Boerse is willing to pay a premium for the ISE. Deutsche Boerse already operates the electronic derivatives exchange known as the Eurex, and it can leverage the ISE to further grow its footprint in Europe and expand into Asia.
To gauge the valuation on the deal, I looked at William Blair's fairness opinion on the merger of the Chicago Mercantile Exchange
At 28 times EBITDA, the ISE's deal gives the company's shareholders little to quibble about. But shares are already approaching the $67.50 buyout price, raising speculation that other bidders will come to the table. Prospective suitors may include the CME, the NYSE, and the Intercontinental Exchange
- ISE: Another Red-Hot Exchange
- NYSE: Earth's Securities Exchange?
- Chicago Merc: What Took You So Long?
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