DBOEF Deutsche Boerse Ag Namen Akt (PK)

By Alexander Osipovich 

Exchange giant CME Group Inc. is considering expanding beyond its core strength in futures with a potential takeover of U.K. financial-technology company NEX Group PLC.

London-listed NEX, which runs major electronic markets for bonds and foreign-exchange trading, said Thursday that it had received a preliminary takeover approach by CME.

Shares in the U.K. company opened 32% higher Friday morning.

NEX said that discussions are at an early stage and there can be no certainty that an offer will be made, or on what terms.

CME has until April 12 to make an offer, according to the rules of the London Stock Exchange. Representatives of NEX and CME declined to comment.

Formerly called the Chicago Mercantile Exchange, Chicago-based CME is a $56 billion global-exchange operator that has grown by absorbing rivals such as the Chicago Board of Trade and the New York Mercantile Exchange. It offers trading in futures contracts on markets ranging from oil to gold to stock-market indexes.

Acquiring NEX, worth GBP2.55 billion ($3.55 billion), would expand CME's reach into the so-called "cash" markets that underpin some of its futures contracts.

NEX owns the biggest electronic platform for U.S. Treasury bonds trading, while CME dominates the market for interest-rate futures linked to government bond prices. CME also has a growing foreign-exchange futures business.

Led by Chief Executive Michael Spencer, NEX formerly was known as ICAP PLC. For years ICAP was the largest player in interdealer brokerage, the business of brokering deals in complex derivatives products between banks, often over the phone.

But in 2016, ICAP sold its brokerage business to rival Tullett Prebon to focus on electronic trading and financial technology, and rebranded itself as NEX.

Mr. Spencer, who founded the forerunner of ICAP in 1986, became one of Britain's richest men with the expansion of the derivatives markets. For his 50th birthday in 2005, he invited about 300 friends to a mansion in the south of France and paid pop star Robbie Williams $1.9 million to provide entertainment.

If completed, a CME-NEX pact would be one of the biggest exchange deals in recent years. The last major acquisition in the sector was Cboe Holdings Inc.'s $3.4 billion takeover of stock-exchange operator Bats Global Markets Inc., completed last year. The combined company is now called Cboe Global Markets Inc.

Some previous exchange deals that sought to unite market operators in different countries have run into trouble due to opposition from politicians or regulators. Last year, the European Union blocked the proposed $28 billion merger between Deutsche Börse AG and London Stock Exchange Group PLC, primarily over antitrust concerns.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com

(END) Dow Jones Newswires

March 16, 2018 04:46 ET (08:46 GMT)

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