Deutsche Börse to Buy Trading Platform 360T for $796.4 Million

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Move boosts German exchange operator’s over-the-counter trading operations

FRANKFURT— Deutsche Börse AG said Sunday it is buying the over-the-counter trading platform 360T for €725 million ($796.4 million) in a move that strengthens the German exchange company’s foreign-exchange operations.

Deutsche Börse and owners of Frankfurt-based 360T Beteiligungs GmbH, which include the U.S. private-equity firm Summit Partners, have signed a definitive agreement for the deal, which still awaits regulatory approval. If approved, the deal would boost Deutsche Börse’s foreign-exchange, money-market and derivatives trading business in the so-called over-the-counter market, where trading is conducted away from exchanges. It would also potentially facilitate handling of currency trades through the exchange group’s clearing arm.

This would be the biggest acquisition for Deutsche Börse since aplanned combination with NYSE Euronext failed to win antitrust approval in Europe in 2012, and comes after new Chief ExecutiveCarsten Kengeter took the helm on June 1. Deutsche Börse’s most recent big acquisition was in 2007, when it bought U.S.-based derivatives exchange International Securities Exchange Holdings Inc., or ISE, for about $2.6 billion.

360T, which describes itself as professional trading venue for foreign-exchange, money-market and derivatives products, has had double-digit annual revenue growth since it opened in 2000. It has subsidiaries in New York, Singapore, India and Dubai, and has been majority owned by Summit Partners since 2012.

Several other exchange operators have been interested in buying 360T. At the end of June, the bidding was narrowed down to a small group of companies including Deutsche Börse, CME Group Inc. andNasdaq OMX Group, according to people familiar with the talks. Most recently, Deutsche Börse competed with CME Group in the bidding, said one person familiar with the matter.

The combination is expected to generate synergies—savings and other benefits—totaling in the double-digit millions of euros over the medium term, through the use of Deutsche Börse’s international distribution network.

Deutsche Börse plans to finance the transaction through a combination of debt and equity to minimize the potential impact on its credit rating. A spokesman said more detail wasn’t immediately available, but the firm will comment further when it its releases second-quarter earnings Monday after the market closes. Excluding expected synergies, it expects the transaction to boost earnings per share immediately. Including medium-term synergy goals, the acquisition will meet customary targets for return on the investment, Deutsche Börse said.

360T wasn’t immediately available to comment further about the transaction terms.

After years of deal-making dormancy, global exchanges appear to be making a big push to compete in foreign-exchange trading. The deal comes a few months after the U.S.-based BATS Global Markets Inc.agreed to buy Hotspot FX, a smaller rival of 360T, for $365 million in cash plus $70 million in potential future payments. Like Hotspot, 360T sold for more than originally expected.

The Journal previously reported a price of more than €600 millionhad been expected.

Volatility in the market, sparked by Greece’s potential exit from the euro bloc and a potential shift in the U.S.’s interest-rate policies, has led to a jump in trading by corporations that want to protect their cross-border transactions. Brokers and speculators are trading more as well.

”This is a new frontier for global exchanges, and we would not be surprised to see more consolidation through similar transactions in the near future,” said Alex Yavorsky, head of market structure and technology banking at Jefferies Group LLC, which advised both 360T and Hotspot on their sales.

While currencies are still expected to trade in informal markets off exchanges, regulators in the U.S. and Europe have moved to require that many currency transactions be centrally cleared, rather than negotiated bilaterally among the trading partners. Deutsche Börse, like other futures exchanges, has a clearing arm that will be able to connect to 360T’s trades.

360T’s network connects buyers and sellers and matches trades between them. Its customers include both banks and brokerages, as well as companies, many of whom aren’t yet connected directly to the big exchanges. It deals not only in physical “spot” trades but also in derivatives such as swaps, forwards and options. Other foreign-exchange trading platforms include Hotspot, ICAP PLC’s EBS Market, Thomson Reuters Corp.’s FXall, and State Street Corp.’s Currenex.

The Wall Street Journal