Nasdaq has wrapped up a hectic week of consolidation among US exchanges by announcing the acquisition of Instinet. After the deal Nasdaq will keep the Inet ECN business but other elements of the Instinet Group will be sold off.
Nasdaq has announced - finally - that it has entered into a definitive agreement to acquire Instinet Group. The much discussed deal has been a topic of widespread debate following press speculation generated ahead of Reuters most recent set of financial reports. In the intervening period the Nyse stepped into the limelight by merging with Chicago-based Archipelago.
As part of the deal, Nasdaq will sell on Instinet's Institutional Broker division to private equity group Silver Lake Partners, while retaining the Inet ECN. Instinet has also entered into an agreement to sell its Lynch, Jones & Ryan (LJR) subsidiary to Bank of New York prior to consummation of the Nasdaq transaction.
Instinet stockholders will receive approximately $1.878 billion in cash, comprised of approximately $934.5 million from Nasdaq, approximately $207.5 million from Silver Lake and the balance from Inet's available cash, including approximately $174 million from Bank of New York. Reuters will pocket approximately $1 billion in cash for its 62% stake in Instinet.
Nasdaq says the transaction will provide market users with a "technologically superior trading platform", positioned to compete effectively in a post-Regulation NMS environment.
It is anticipated that Nasdaq will switch off its own trading systems in favour of the Inet platform, in the process saving $100 million in synergy costs over the next two to three years. The transaction is also expected to reduce clearing costs and corporate expenses associated with the combined entity.