Nasdaq deepens fintech push with $10.5 billion Adenza deal

  • PE giant Thoma Bravo takes almost 15% of the stake in Nasdaq
  • Nasdaq shares fall 10% in morning trading
  • The deal consists of $5.75 billion in cash and 85.6 million Nasdaq shares

June 12 (Reuters) – Nasdaq ( NDAQ.O ) said on Monday it will buy Thoma Bravo-owned software firm Adenza for $10.5 billion in the exchange operator’s biggest acquisition yet, as it accelerates efforts to become a more technology-focused company.

Nasdaq, like its peers, has been on an acquisition spree to diversify its portfolio of technology and intellectual property after regulations in 2005 opened up the stock trading market to competition from brokers.

Since then, Nasdaq has bought Nordic market maker OMX in 2007 for $3.7 billion, spent $1.1 billion on the International Securities Exchange in 2016, and acquired anti-financial crime software firm Verafin in 2020 for $2.75 billion.

However, shares fell nearly 10% to $52.39 on Monday morning on fears they overpaid for Adenza. The deal includes $5.75 billion in cash and 85.6 million shares of Nasdaq stock.

“Nasdaq was a $28 billion company coming up to do a $10.5 billion buyout to pay 18 times earnings from private equity sellers. That’s a lot for shareholders to process,” said Michael O’Rourke, market strategist at JonesTrading.

The company said it intends to issue a nearly 15% stake to the owners of Adenza, which is controlled by Thoma Bravo, as part of the deal. The private equity company will also have the right to appoint a candidate to Nasdaq’s board.

“Investors are not thrilled with the premium paid for Adenza at 31 times 2023 earnings before interest, taxes, depreciation and amortization (EBITDA), especially as they have been so focused on reducing leverage,” said Andrew Bond, analyst at Rosenblatt Securities. .

But Nasdaq said the purchase of Adenza is expected to boost the medium-term organic revenue growth outlook for Solutions Businesses, which designs and develops financial software for investors, from 7%-10% to 8%-11%.

The deal is expected to close within six to nine months.

Adenza, which makes software used by banks and brokerages, is expected to reach about $590 million in annual revenue by 2023, Nasdaq added.

“Our customers are also investing to integrate new technologies into their business, especially artificial intelligence and cloud. And we believe these trends will only intensify in the future,” CEO Adena Friedman said on a call with analysts.

Nasdaq sells technology products to other exchanges and financial companies around the world.

Goldman Sachs & Co. LLC and JP Morgan Securities LLC are financial advisors to Nasdaq, while Qatalyst Partners LP is lead financial advisor to Thoma Bravo and Adenza.

Reporting by Manya Saini in Bengaluru, Anirban Sen and John McCrank in New York and Michelle Price in Washington; Additional reporting by Sruthi Shankar; Editing by Nivedita Bhattacharjee

Our standards: Thomson Reuters Trust Principles.

Manya Saini

Thomson Reuters

Manya Saini reports on prominent publicly traded US financial firms, including Wall Street’s biggest banks, card companies, asset managers and fintechs. Also covers late-stage venture capital funding, US IPOs along with news and regulatory developments in the cryptocurrency industry. Her work is usually featured in the finance, market, business and future of money sections of the website. Contact: 9958867986

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