CHICAGO and LONDON – December 10, 2019 – Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced it has entered into a definitive agreement to acquire EuroCCP, a leading pan-European equities clearing house.
The transaction will bring together two companies that have long championed competition, open access and clearing interoperability in Europe. Additionally, Cboe’s ownership of EuroCCP is expected to provide opportunity to pursue the development of equity derivatives trading and clearing capabilities in the region, subject to regulatory approvals.
The two companies are closely aligned on a vision to further expand the benefits of EuroCCP’s open-access model serving other exchanges and trading venues. EuroCCP currently clears trades for 39 trading venues, which represent close to 95 percent of Europe’s equity landscape, making it the most connected equity central counterparty (CCP) in the region.
EuroCCP clears on average between four to five million trade sides daily, totalling €30 to €40 billion in value, and provides clearing members with easy access and the ability to maximize operational efficiency and netting opportunities while reducing risk and cost.
Cboe sees an opportunity to further grow this business by capitalising on the strength of its panEuropean network. Ed Tilly, Chairman, President and Chief Executive Officer of Cboe Global Markets said, “Cboe’s planned acquisition of a leading equities clearing house in Europe is an important step in our growth strategy for the region. We believe ownership of EuroCCP will enhance our current European equities business, while providing opportunities to potentially diversify our business, including trading and clearing derivatives, in the future. We look forward to officially welcoming the EuroCCP team to Cboe Global Markets.”
David Howson, Chief Operating Officer of Cboe Europe said, “As Europe’s leading pan-European equities clearing house, EuroCCP is essential to providing cost-effective clearing and trading competition in European capital markets that benefits all market participants. We are committed to maintaining and extending these benefits to customers throughout the region. We are optimistic that we can further grow the EuroCCP business by leveraging our track record of innovation and strong customer relationships to create vibrant, efficient pan-European market infrastructure.”
Cécile Nagel, Chief Executive Officer of EuroCCP said, “Cboe is a staunch advocate of open access and interoperability, values which EuroCCP has long promoted, with an established track record of servicing clients globally and providing innovative products across numerous asset classes. We believe this transaction positions EuroCCP for continued success and we look forward to becoming part of the Cboe group. EuroCCP remains committed to offering a best-in-class service with leading client satisfaction.”
While the company expects its plans to acquire EuroCCP and pursue equity derivatives trading and clearing in Europe to generate positive financial returns longer-term, these initiatives are expected to be dilutive to earnings over the next three to four years.
The potential impact to earnings per share is currently expected to be in the range of $0.08 to $0.10 for 2020 and 2021. The estimated earnings per share impact is as follows: (1) a portion reflects the potential acquisition of EuroCCP, representing about half of the estimated earnings per share impact in 2020 and neutral to slightly positive estimated earnings per share impact in 2021 and (2) the remaining portion in 2020 and 2021 primarily reflects Cboe’s planned investment in building out its European derivatives clearing and trading business. This investment is expected to have the greatest negative earnings impact in the first few years as the company ramps up its European derivatives trading and clearing and builds sufficient scale. The potential expense impact from these initiatives is not reflected in the company’s 2020 expense guidance that was reaffirmed on November 1, 2019.
Cboe looks forward to providing further insights into its European equity derivatives trading and clearing initiatives in the coming months.
EuroCCP is headquartered in Amsterdam and regulated by De Nederlandsche Bank and by Autoriteit Financiële Markten. EuroCCP is equally owned by Cboe Europe, Euronext, Nasdaq, ABN AMRO Clearing Bank and The Depository Trust & Clearing Corporation (DTCC). T
he transaction, which Cboe plans to fund with cash on hand, is expected to close in the first half of 2020, pending the receipt of required regulatory clearances and the arrangement of a supporting liquidity facility at the EuroCCP clearing entity level.
PJT Partners acted as exclusive financial advisor to EuroCCP, Allen & Overy acted as exclusive legal counsel to EuroCCP and Greentarget acted as communications strategy advisor to EuroCCP on the transaction. Cboe’s legal counsel on the transaction was Macfarlanes LLP and Norton Rose Fulbright LLP.