LMAX Exchange buys out Paddy Power Betfair stake for £21.9M with Silicon Valley Bank funding

LMAX Exchange trading floor

Institutional FX exchange provider LMAX Exchange Group has announced that it has completed an equity purchase of Paddy Power Betfair plc’s remaining stake in the business.

The 31.35% stake (or 187,811 shares) was bought from Paddy Power Betfair for £21.945 million, valuing LMAX Exchange at £70 million. The buyback brings 95% of the company under the control of the Group’s management.

LMAX Exchange was originally established as an offshoot of online gaming company Betfair into financial trading, with backing from Goldman Sachs Group Inc (NYSE:GS). Betfair later merged with rival Paddy Power to form Paddy Power Betfair PLC (LON:PPB). Goldman sold its stake in LMAX back to Betfair in early 2012. Later that year, Betfair spun the company off to LMAX Exchange management, for next to nothing, retaining the minority equity stake which it is selling today.

And that move seems to have paid off handsomely for both Betfair and current LMAX Exchange management – under the management team assembled by LMAX Exchange CEO David Mercer, the company has flourished reporting growth of 20% in its most recently reported fiscal year (2016), with Revenues of £27.7 million, and monthly volumes $175 billion.

The purchase is being financed by a senior debt facility provided by the Silicon Valley Bank (SVB) unit of SVB Financial Group (NASDAQ:SIVB), a bank focused solely on the innovation economy. The terms of the loan are not disclosed.

LMAX Exchange recently underwent a regulatory-driven reorganization, diving the company into two units due to MiFID II: MTF and Broker.

David Mercer LMAX CEO

David Mercer, LMAX Exchange

David Mercer, CEO of LMAX Exchange Group said:

I am very pleased to be working with Silicon Valley Bank. SVB’s focus on the innovation economy resonates perfectly with LMAX Exchange growth story and future ambition – this creates a solid foundation for our partnership going forward.

Having successfully built a global exchange marketplace for FX, our ambition is to continue growing our distribution and propagate the exchange execution model across capital markets. Using our proprietary and innovative exchange technology, we have led change in the FX industry by bringing in a new market structure, one that delivers complete transparency, open access and a level playing field for all market participants. Today, LMAX Exchange counts among its members all major global banks and non-banks and our trading volumes are breaking new record highs – further validation of the industry’s transition to an exchange execution model. By consolidating the ownership of LMAX Exchange Group, we are positioning the business for continued growth and building long term stakeholder value.

Rosh Wijayarathna, Director of Silicon Valley Bank’s Corporate Banking team, said:

We work with innovative businesses that are global by nature, so managing their FX exposure is an ever-important factor. As the world gets smaller and the FX industry grows, the market is increasingly a focus for global regulators. LMAX Exchange is an impressive high-growth global business, which brings greater transparency to the FX industry through the exchange execution model, no ‘last look’ functionality and award-winning low latency technology. We are delighted to work with such an experienced management team and look forward to a continued partnership.

LMAX Exchange is an innovator and tech disruptor in FX. It was the first provider to introduce the exchange style execution model for FX, and LMAX Exchange is an active advocate of FX market reform to improve transparency and fairness in execution. Management stated that growth and transformation in the FX market holds multiple opportunities for LMAX Exchange, in its aim to propagate the exchange model globally.


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