Canada’s premier exchange group moves to accelerate growth as a global data and analytics solutions provider with planned addition of European pre-trade energy platform, and announces analyst conference call to discuss
TMX Group Limited (TSX:X) today announced it has entered into an agreement to acquire London-based Trayport Holdings Limited, and its U.S.-based affiliate, Trayport Inc. (collectively, Trayport), a provider of pre-trade energy solutions for traders, brokers and exchanges from Intercontinental Exchange, Inc. (ICE) for £550 million / C$931 million in total consideration, including £350 million / C$592 million in cash.
In conjunction with the proposed acquisition of Trayport, TMX Group has agreed to sell Natural Gas Exchange Inc. (NGX) and Shorcan Energy Brokers Inc. to ICE, valued at a combined £200 million / C$339 million.
The sale of these assets was an important component of TMX Group’s successful bid, which is part of the total consideration for the acquisition of Trayport.
The acquisition of Trayport brings a proven team of product development, data, analytics and sales talent to TMX and immediately strengthens our global data and analytics business,” said Lou Eccleston, Chief Executive Officer, TMX Group. “From a strategic perspective, this transaction will significantly accelerate TMX’s global expansion, increase the portion of our revenue from recurring sources and enhance the portfolio of analytics products in our Market Insights business. As we look across our multi-faceted business, we see significant opportunities to leverage Trayport’s proven expertise and premier position to enable TMX to continue to thrive in today’s global marketplace.
Trayport was founded in 1993 and currently has approximately 240 employees in offices in London, New York and Singapore. Trayport will continue to license its solutions platform to serve a global client base comprised of energy commodities traders, exchanges, wholesale brokers, and central clearing counterparties (CCPs), providing price discovery, trade execution, and post-trade services.
TMX Group plans to strategically invest to support Trayport’s existing growth initiatives while also seeking ways to develop and deploy analytics and benchmark products to facilitate better trading strategies, leverage the combination of Trayport’s European leadership with TMX’s expertise in North American energy markets to create new products, and explore strategic relationships in new geographies.
Summary financial details:
The £550 million / C$931 million purchase price comprised of £350 million / C$592 million in cash, and NGX and Shorcan Energy, valued at a combined £200 million / C$339 million.
The cash consideration is expected to be funded through a combination of approximately C$200 million of cash on hand, approximately C$175 million of commercial paper, and the balance through a portion of our new fully committed credit facility of C$650 million.
Trayport’s last twelve months (LTM) revenue through June 30, 2017 was £58 million / C$99 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was £30 million / C$51 million. For the period from 2014 to 2016, Trayport’s revenue has increased at a compounded annual growth rate of 9%.
The combined LTM revenue of NGX and Shorcan Energy through June 30, 2017 was approximately C$59 million and the combined operating expenses were approximately C$34 million.
The transaction is expected to have a positive impact on TMX Group’s adjusted earnings per share, being immediately accretive in 2018, before any synergies.
The UK Competition and Markets Authority (CMA) has approved the sale of Trayport to TMX Group. The sale of NGX and Shorcan Energy to ICE is subject to regulatory approval and notifications including approval from the Canadian Competition Bureau. The parties anticipate closing the sale of NGX in late 2017 or early 2018. If closing of the sale of NGX and Shorcan Energy does not occur within 45 days of today then, at the election of TMX Group or ICE, the purchase of Trayport can be separated from the sale of NGX and Shorcan Energy, and the purchase of Trayport can be completed for the full price of £550 million / C$931 million in cash. The sale of NGX and Shorcan Energy to ICE would take place subsequent to closing conditions being satisfied, including receipt of applicable regulatory approvals, for £200 million in cash. If closing of the sale of NGX and Shorcan Energy to ICE does not occur within 90 days of today, ICE has the option to not proceed with the purchase of NGX and Shorcan Energy. In connection with the execution of the Agreements, TMX Group and ICE have also entered into a non-binding memorandum of understanding agreeing to explore in the future further avenues for possible collaboration.
Barclays is acting as financial advisor to TMX Group on the transactions. National Bank of Canada is providing the new committed credit facility.