Intercontinental Exchange (NYSE: ICE), a global network of exchanges and clearing houses, has entered into an agreement to acquire Trayport, a subsidiary of GFI Group, for $650 million in ICE common stock, according to an ICE statement.
GFI Group has already had an eventful year, having been acquired by BGC Partners back in March 2015. Its subsidiary, Trayport, is a technology platform provider, helping serve brokers for both electronic and hybrid trade execution that’s largely relegated to European over-the-counter (OTC) utility markets.
The agreement is important for ICE in that it will usher in the provision of a suite of new services to the European OTC energy markets, which presently include comprehensive offerings of European power, natural gas and coal options.
The sale has largely been anticipated since GFI and BGC merged back in March, though the passage of a definitive agreement represents a victory for ICE, who successfully outmaneuvered CME Group, an original bidder prior to the involvement of BGC Group.
As far back as July 2014, CME Group pitched a $4.55 offer for shares of GFI Group, having jumped to an eventual $5.25 cash or stock takeover bid, which GFI Group shareholders turned down via vote. BGC ultimately outbid CME Group with a $5.45 all-cash offer, which laid the groundwork for the most recent acquisition by ICE.
Trayport had long been seen as a prize waiting to be had in the M&A space, which was reflective in its valuation during BGC’s Q2 financial metrics. According to a company statement at the time of its earnings release in July in regards to a potential sale, “Numerous serious parties are participating in the process at a valuation that reflects Trayport’s continuing growth in the year following last year’s proposed transaction, as well as its high margins, leading technology, and strategic importance in the global energy and commodities markets."
Indeed, earlier this year the purchase price for GFI came in at roughly $780 million, which included both its brokerage business and FENICS platform – FENICS is also reportedly up for sale as well, though has not garnered the same level of interest as Trayport. That being said, the figure tied to the BGC’s earlier purchase price of GFI can be attributed to Trayport.
Pending the completion of the deal, London-based Trayport will continue to serve its regional clientele, which includes a pantheon of energy producers, consumers, brokers, exchanges and clearing houses, as well as its existing technology platform. As a component of ICE, Trayport will also grant customers access to a wider range of Risk Management and Analytics services across OTC markets.
The aforementioned agreement has already been unanimously approved by the Boards of Directors of both companies with an expected closure date on the transaction somewhere during Q1 2016, pending the requisite regulatory approvals.
According to ICE Chairman and CEO Jeffrey C. Sprecher in a recent statement on the acquisition, "European regulators have made clear that they do not expect OTC gas and power markets to be subject to the mandatory clearing provisions that are being applied to other commodity markets. As such, these vital markets will require continued investment as part of the European energy market evolution.”
“In addition, with ICE’s experience in managing secure technology, we are well positioned to support the continued development of these systems. Consistent with our track record of bringing improvements to markets, we will invest in and enhance the Trayport offering based on evolving customer needs," he added.
"We are pleased to take the next step in a rapidly changing European OTC utility landscape with ICE’s stability and capacity to invest in our growth. Our customer-centric platform will continue to serve the needs of the utilities market as it evolves, and we look forward to completing the transaction and advancing into our next stage of growth,” reiterated Elliott Piggott, CEO of Trayport, in an accompanying statement
