AP
Nasdaq Buying Philadelphia ExchangeWednesday November 7, 6:23 pm ET
By Tim Paradis, AP Business Writer
Nasdaq Stock Market Buying Philadelphia Exchange for $652M; Lands No. 3 U.S. Options Market NEW YORK (AP) -- The Nasdaq Stock Market's agreement to buy the Philadelphia Stock Exchange for $652 million in cash gives the largest U.S. electronic stock market a foothold in the fast-growing options market.
The deal, unveiled Wednesday, comes as many of the world's exchanges are succumbing to a wave of consolidation aimed at boosting market share and protecting profits as competition mounts from electronic upstarts.
Nasdaq said it expects the acquisition of the nation's oldest stock exchange and its third largest options market to close in the first quarter and start to add to Nasdaq's bottom line in 2009.
Nasdaq plans to maintain the Philadelphia Exchange's structure -- operating the electronic options trading platform alongside the options trading floor in Philadelphia. The Philadelphia Exchange, which was founded in 1790, hired financial advisory services firm Greenhill and Co. in August to outline its options, including a possible sale.
"This transaction will add immediate exposure to a fast-growing options space. It allows us to diversify our products and services to best serve our customers," Nasdaq President and Chief Executive Bob Greifeld said in a conference call discussing the deal.
The move comes as Nasdaq Stock Market Inc., like other exchanges, has been shaped by a wave of consolidation among the world's exchanges. New York-based Nasdaq has been acquisitive along other parts of the East Coast. In a deal announced last month, Nasdaq snapped up the Boston Stock Exchange, which has capacity for options trading.
Greifeld said the Philadelphia Exchange will complement an options-trading operation Nasdaq plans to introduce in December. The average number of equity options contracts the Philadelphia Exchange trades a day has jumped to 10.5 million this year from 3.3 million in 2003 -- a compound annual growth rate of 34.7 percent.
The deal also gives Nasdaq a futures market run by the Philadelphia Board of Trade, a stock market business and an operation for clearing, or executing, stock trades.
He said the deal indicates Nasdaq hasn't neglected the U.S. by looking to expand overseas.
"It's important to note that as we expand our global footprint we continue to do the blocking and tackling here in the U.S.," he said.
A deal between Nasdaq and Philadelphia Exchange follows Nasdaq's bid for the Nordic stock exchange operator OMX AB. Nasdaq and Borse Dubai have struck a complex deal to acquire OMX for $4.99 billion.
The Philadelphia Exchange holds about 15 percent of the options market and ranks behind the Chicago Board Options Exchange and the International Securities Exchange Holdings Inc. by size. The International Securities Exchange is being acquired by German stock exchange operator Deutsche Boerse AG for $2.8 billion.
The New York Stock Exchange, which in April acquired Euronext NV to form NYSE Euronext, has in the past expressed interest in acquiring an options exchange.
Nasdaq shares fell $1.60, or 3.3 percent, to $47.21 amid a broader market pullback. However earlier in the session the stock reached a new high of $50.47.
The boards of both Nasdaq and the Philadelphia Exchange have signed off on the deal and Greifeld said he doesn't anticipate any difficulty in winning regulatory approval from the Securities and Exchange Commission.
Nasdaq Stock Market:
http://www.nasdaq.comPhiladelphia Stock Exchange:
http://www.phlx.com
