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Germany’s prominent execution venue Deutsche Boerse AG (FRA:DB1) has today announced that it will purchase compatriot FX trading platform 360T for 725 million euros.
According to a report today by Reuters, 360T is one of a series of multi-bank, multi-user platforms which have revolutionised foreign exchange trading over the past decade.
The report further states that according to various sources, Deutsche Boerse beat U.S. commodities and currency exchange operator CME Group Inc (NASDAQ:CME) in the auction to acquire the firm.
In June this year, LeapRate reported that Deutsche Bourse had begin to investigate the possibility of acquiring 360T.
At that time, LeapRate had stated that should Deutsche Boerse make a binding bid for 360T it would represent new frontiers and a move into OTC market segments with Forex as a specialization.
“Deutsche Boerse group regularly looks at external options for growth and follows up on them if they create value,” a spokesman for Deutsche Boerse was quoted as saying in June 2014.
One week prior to that report, LeapRate had stated that U.S. private-equity firm Summit Partners was looking at selling the German based currency platform in a potential 600 million euro ($675 million) deal and had hired Jefferies to handle the sale. The figure reached at the final transaction has outstripped this initial estimate from last year.
When Summit Partners, which is the largest shareholder in 360T Group, closed on it’s stake in the trading platform back in 2012, Scott Collins, a Managing Director of Summit Partners stated: “We are committed to supporting 360T’s growth strategy both in FX and other adjacent financial markets, and we welcome the company’s employees retaining a significant stake as part of the transaction.”
Reuters today continued to explain that the deal is the biggest acquisition by Deutsche Boerse since the Frankfurt-based stock-exchange operator bought U.S. derivatives exchange ISE in 2007 for $2.8 billion. It is also the first large deal by the new Chief Executive Carsten Kengeter, who is targeting further acquisitions.
Mr. Kengeter is already in talks with Swiss Six Group to buy the remaining stakes in their index joint ventures Stoxx and Indexium. Over the last couple of years, several merger and acquisitions had failed, among others a planned tie-up with the New York Stock Exchange 2012.
Deutsche Boerse has stated that it expects double-digit million euro revenue synergies in the medium term from the deal, which it expects to be immediately accretive to cash earnings.
A company spokesman said most of the 360T acquisition will be financed with bonds, while no decision has been taken about a potential small capital increase. He added that Deutsche Boerse aims to keep its indebtedness at a level allowing for the AA rating of its Clearstream unit to remain unchanged.
With volatility, volumes and returns booming in the dollar’s rally over the past year, currency trading is attracting more attention from banks, retail trading houses and investors.
Deutsche Boerse’s Eurex and other major exchange groups have been positioning themselves to take a role in what they expect with time will be a more heavily regulated market.
Those particular efforts have focused largely on more complicated instruments like options and futures rather than the spot currency transactions that make up the $5 trillion a day market, in which 360T is one of the biggest non-bank players.
360T founder Carlo Koelzer is credited a decade ago with helping launch a new generation of forex platforms that allowed European companies to pick and choose which banks they traded currencies with.
Data from industry publisher Euromoney shows 360T is now the third-largest such platform, behind Thomson Reuters-owned FXAll (TRI.TO), FX Connect and just ahead of Bloomberg. 360T Managing Director Alfred Schorno told Reuters earlier this year that trading on 360T was above 100 billion euros a day, although the company has since ceased to publish volume data.
360T was founded in 2000. Private equity group Summit Partners took a majority stake in 2012, peer Brockhaus has kept a 10.7 percent stake and 360T employees also retained stakes.
The deal makes 360T the most valuable German fintech company and in the view of the German Startup Association, the transaction will make it easier for other fintech firms to find investors.