Nasdaq Inc (NDAQ.O) said on Wednesday it would buy U.S. options exchange operator International Securities Exchange for $1.1 billion from Deutsche Boerse AG (DB1Gn.DE), the latest deal to emerge from a spate of exchange merger talks.
ISE operates three electronic options exchanges which together account for more than 15 percent of U.S. volume, while Nasdaq operates another three. Combined, Nasdaq would command more than 40 percent of the market, extending its lead as the No. 1 U.S. options exchange operator.
“The ability to further that lead gives us advantages as to how we could serve our customers because you have a different volume versus scale arrangement,” Nasdaq Chief Executive Bob Greifeld said in an interview.
The deal would also free up capital for Deutsche Boerse, which has said it plans to merge with the London Stock Exchange Group Plc (LSE.L) to create a European trading powerhouse that could better compete against U.S. rivals.
Intercontinental Exchange Inc (ICE.N) said it may make a rival bid for the LSE, raising the prospects of a takeover battle.
Nasdaq, which plans to move ISE’s trading platforms onto Nasdaq technology, said it could strip out $40 million from the two businesses through the transaction.
The deal would also give Nasdaq an additional 20 percent stake in the Options Clearing Corporation, for a total of 40 percent ownership in the world’s largest equity derivatives clearing corporation.
Greifeld said he had been looking to buy ISE for years, and talks with Deutsche Boerse CEO Carsten Kengeter picked up over the past three months.
The deal does not include ISE’s stake in No. 2 U.S. stock exchange operator BATS Global Markets, or blockchain startup Digital Asset Holdings, which will continue to be owned by Deutsche Boerse, the German company said.
Nasdaq said the transaction was expected to be finalized in the second half of the year, pending regulatory approval, and it would likely increase earnings within 12 months of closing.
Nasdaq has made several acquisitions in recent years that have helped boost its profits and share price. These include Chi-X Canada, that country’s largest alternative trading system, in a deal that closed last month; and index provider Dorsey, Wright & Associates last year.