March 25, 2021 - Cboe Global Markets, Inc. has announced today that it has entered into a definitive agreement to acquire Chi-X Asia Pacific Holdings, Ltd. (Chi-X Asia Pacific) from J.C. Flowers & Co. LLC. This acquisition will provide Cboe with a single point of entry into two key capital markets – Australia and Japan – to help enable it to expand its global equities business into Asia Pacific, bring other products and services to the region, and further expand access to its unique proprietary product suite in the region. The transaction is expected to close in the second or third quarter of 2021, subject to regulatory review and other customary closing conditions.
Ed Tilly, Chairman, President and CEO at Cboe Global Markets, said: "With the planned acquisition of Chi-X Asia Pacific, we continue to execute on our growth strategy by broadening our geographic and asset class presence, while enabling the further extension of our product offerings to our global network of customers. This is an exciting investment in attractive, growing markets that will complement our North American and European operations and provide a foothold in the key Asia Pacific region, positioning us to become a truly global marketplace for our customers. In a short number of years, the Chi-X Asia Pacific team has built their business into one of the largest market operators in Asia Pacific. We look forward to working with them to accelerate the company's further growth, building on our shared cultures of innovation and customer-first approach as we aim to bring greater choice to investors in Asia Pacific."
Chi-X Asia Pacific is one of the most successful alternative market operators in Asia Pacific, with core operations in Australia and Japan. Chi-X Australia (CXA), the country's second largest securities exchange achieving an 18.4 percent total market share, offers trading in all Australian-listed securities, as well as the exclusive trading of CXA quoted warrants and ETFs. Chi-X Japan (CXJ), a leading proprietary trading system for Japanese equities and third largest equities venue in the country with a 2.7 percent lit market share, offers four trading books including both displayed and non-displayed mechanisms.
David Howson, currently President of Cboe's European operations will lead the company's business expansion into the region and has been promoted to President, Europe and Asia Pacific. Mr. Howson will work closely with the global Cboe team and with the Chi-X Asia Pacific local management teams led by Vic Jokovic, Chief Executive Officer at Chi-X Australia and Toru Irokawa, Representative Director and President at Chi-X Japan, who will continue to lead their businesses.
Cboe plans to leverage Chi-X Asia Pacific's expansive presence in Asia Pacific and bring to the region BIDS Trading's industry-leading block trading capabilities. With BIDS' current network covering major North American and European equities markets, the addition of Asia Pacific equities is expected to create a global block trading platform to serve a broader base of customers. Cboe also expects to enhance investor access to other products and services. In particular, Chi-X Asia Pacific is expected to provide an expanded distribution network enabling Cboe to further offer its unique proprietary products to clients in Australia and Japan.
This deal also creates an opportunity for Cboe to become the global leader in equities market data, offering comprehensive data from most major markets around the world including the U.S., Canada, Australia, Japan and 15 European countries.
The planned acquisition builds on Cboe's newly created Data and Access Solutions business, which combines Cboe Information Solutions with its global market data and access services into one holistic offering, enabling customers around the world greater access to all of Cboe's expanded data and analytics capabilities through a unified offering.
Mr. Jokovic said: "Over the past decade, Chi-X Australia has built an enviable reputation as an innovative market operator with superior market expertise, customer service and a pioneering spirit that strongly aligns with Cboe's legacy of product and market innovation. We are excited to draw upon Cboe's core strengths as a leading global exchange operator to further enhance the competitive landscape in the Australian markets with new innovation and market solutions to better meet customer needs."
Mr. Irokawa said: "Chi-X Japan is currently the only broker-neutral proprietary trading system in Japan, and remains committed to delivering best execution and significant cost-savings for both retail and institutional investors through our superior services and rich set of trading solutions. With Cboe's investment in Chi-X Japan, we look forward to enhancing our capabilities and bringing vital competition to help strengthen the efficiency and resiliency of the entire Japanese equities market."
Australia is the world's 9th largest global economy, representing approximately $2.2 trillion in market capitalisation and averaging 4.6 billion shares traded a day in its equities market. Japan ranks as the 4th largest global economy, representing $6.2 trillion in market capitalisation with over $5.1 trillion total value traded annually in its equities market4.
Cboe plans to fund the transaction with cash on hand, supplemented by existing credit agreements, if needed. The transaction is expected to close in the second or third quarter of 2021, subject to regulatory review and other customary closing conditions. Terms of the deal were not disclosed, however the company noted that the purchase price is not material from a financial perspective and is expected to be nominally accretive to the company's adjusted earnings in 2021. Chi-X Asia Pacific generated approximately $26 million in net revenue for the twelve months ended December 31, 2020, reflecting a 26 percent growth rate compared to the prior year, with non-transactional revenue comprising 67 percent of the overall net revenue.
Legal advisors to Cboe Global Markets on the transaction are Sidley Austin LLP (U.S. and Hong Kong), King & Wood Mallesons (Australia), Nagashima Ohno & Tsunematsu (Japan) and SyCip Salazar Hernandez & Gatmaitan (Philippines), with BofA Securities serving as financial advisor.
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