Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE), has agreed to buy bond trading platform MarketAxess Holdings in an all-cash deal. The deal is valued at around $6 billion, with an enterprise value of $5.7 billion.
ICE will pay $167 per MarketAxess share in cash to buy all outstanding shares of the company. The offer price is 33% higher than MarketAxess' closing share price on Wednesday, giving shareholders a premium over the market value.
What does MarketAxess do?
MarketAxess is an electronic bond trading platform that connects around 2,100 institutional investors and broker-dealers across more than 90 countries. The platform allows electronic trading in corporate bonds, U.S. Treasuries, emerging market debt, and other fixed-income securities, according to Bloomberg.
The acquisition will help ICE expand its fixed-income business and strengthen its bond trading offerings. ICE wants to create a single platform where bond traders can complete different parts of the trading process in one place.
How will the deal help investors?
The merged business will provide pre-trade price discovery and analytics to help traders understand prices before making deals. It will also offer electronic trade execution for both institutional and retail investors.
{{/usCountry}}The merged business will provide pre-trade price discovery and analytics to help traders understand prices before making deals. It will also offer electronic trade execution for both institutional and retail investors.
{{/usCountry}}Clients will get post-trade data, benchmarking, and compliance tools after trades are completed. Reuters said the combined platform will bring together pre-trade analytics, electronic execution, and post-trade compliance tools in one system.
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ICE CEO Jeff Sprecher said the company has spent more than 20 years using technology to improve large and inefficient parts of global financial markets. He called the MarketAxess acquisition "the natural next step" in ICE's long-term strategy, according to Bloomberg. Sprecher also said the combined company will build a more transparent, efficient, connected and accessible fixed-income ecosystem for investors.
ICE shares rise after deal
ICE shares rose about 1.7% in premarket trading after the acquisition announcement and strong quarterly earnings. MarketAxess shares jumped 28% in premarket trading following the deal announcement. Reuters noted that before this rally, MarketAxess stock had fallen nearly 31% this year.
Along with announcing the acquisition, ICE reported higher quarterly profit, helped by strong trading activity. The company said market volatility encouraged more investors to trade and hedge their positions.
ICE said volatility linked to the U.S.-Iran war, changing interest rate expectations, and AI-related market expectations increased trading activity, according to Reuters. Ongoing conflicts in Ukraine and the Middle East also increased volatility in oil markets, leading to more trading in energy products.
ICE reports strong quarterly earnings
Revenue from ICE's exchanges business, its biggest revenue source, rose 3% to $1.46 billion during the quarter. Revenue from the fixed-income and data services business increased 8%, helped by subscription-based pricing data for debt assets. Revenue from mortgage technology grew 5% compared with a year earlier. However, despite strong trading activity, energy segment revenue fell 13% in the second quarter.
Average daily trading volume in interest rate products increased 24% year over year. Trading volumes in agriculture and metals products rose 36% compared with the previous year. Jeff Sprecher said customers continued using ICE's regulated markets, trusted data and technology to manage financial risks during a period of rapid changes in global markets, according to Reuters.
ICE reported net income of $958 million, or $1.69 per share, for the quarter ended June 30. A year earlier, the company had reported net income of $851 million, or $1.48 per share.