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The Chicago Board of Options has agreed to buy Bats Global Markets in a $3.2 billion deal, the companies announced on Monday.
The deal is valued at $32.50 per Bats share, a 23% premium over Bats’ closing price on Thursday, when reports of the deal talks first emerged. It consists of 31% cash and 69% CBOE stock.
The CBOE is the largest options exchange in the US, valued at about $5.65 billion.
By buying Bats, the CBOE is looking to extend its geographical reach and products while cutting costs. The deal is the latest sign of consolidation in the exchange business; the London Stock Exchange and Deutsche Boerse are trying to create the largest exchange group in Europe, and a Chinese-led investor group bought the Chicago Stock Exchange in February.
“CBOE Holdings expects to utilize Bats’ leading proprietary trading technology by migrating trading in all of the combined company’s markets onto a single, proven platform,” the statement said.
Bats was founded in 2005 and has aggressively competed for market share from stalwarts like the New York Stock Exchange, Nasdaq, and the London Stock Exchange. It focuses on exchange-traded funds, or ETFs, and was the top US market operator for ETF trading in August.
The CBOE said it expected to gain up to $65 million in annualized expense synergies, which are typically achieved through cost cutting, in the five years after the deal closes.
Bank of America Merrill Lynch and Broadhaven Capital Partners are the lead financial advisers to the CBOE. Barclays and UBS will advise Bats.
After the deal closes, CBOE Holdings CEO Edward Tilly will hold that title in the combined company. Bats CEO Chris Concannon will be president and chief operating officer.