ICE Agrees to Acquire BGC's Trayport for $650 Million

  • Deal bulks up ICE's already strong European energy trading arm
  • ICE rival CME Group tried to purchase Trayport in 2014

Intercontinental Exchange Inc., which owns futures markets and the New York Stock Exchange, agreed to buy Trayport from BGC Partners Inc. for $650 million in stock, adding a key piece of infrastructure in the European energy trading industry.

The technology developed by London-based Trayport, which ICE is buying in exchange for 2.5 million shares, helps brokers and energy producers trade power, natural gas and coal products in Europe. ICE already dominates European energy trading given its control of markets for refined products, natural gas and Brent crude oil, the primary global benchmark for oil. Trayport expands its reach in the less-regulated over-the-counter energy markets.

“Trayport is a valuable asset in the energy space," Chris Allen, an analyst at Evercore ISI, wrote in a note to clients after the sale was announced Monday. "The asset adds incremental market data and is a fairly broadly used subscription-based trading platform."

The deal keeps Trayport out of the hands of ICE’s top competitor, CME Group Inc., which tried to buy it as part of its failed 2014 bid for GFI Group. BGC ultimately purchased GFI and is now selling the Trayport division to ICE.

Shares of ICE gained after the transaction was announced, rising 1.4 percent to $262.10 at 4 p.m. New York time. BGC advanced 5 percent to $9.02.

New Regulations

Jeffrey C. Sprecher
Jeffrey C. Sprecher
Photographer: Andrew Harrer/Bloomberg

Europe is reshaping its financial markets with Mifid II, a regulatory overhaul set to take effect over the next several years. Some markets will see increased trading obligations such as mandatory clearing -- or backing trades to help lessen the harm if a trading partner goes bankrupt.

“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,” ICE Chairman and Chief Executive Officer Jeff Sprecher said in a statement Monday. “These vital markets will require continued investment as part of the European energy market evolution.”

The deal, which is subject to regulatory approval, comes three weeks after ICE said it would pay $5.2 billion to buy Interactive Data Corp., adding a service that helps price corporate bonds. ICE expects to complete the deal in the first quarter of 2016.

BGC Chairman and CEO Howard Lutnick, who disclosed plans to sell Trayport in July, said last month that the brokerage was considering options to boost shareholder value. Lutnick said investors were undervaluing BGC’s assets.

Trayport was “reasonably priced, it seems,” said Paul Gulberg, an analyst at Portales Partners LLC. For ICE, Trayport is a “complementary business to what they do.”

ICE’s financial advisers were Goldman Sachs Group Inc. and its legal adviser was Shearman & Sterling LLP. Cantor Fitzgerald & Co. advised BGC and Wachtell, Lipton, Rosen & Katz provided legal counsel.

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