Man Group to acquire 70% stake in Eurex US
27 July 2006 | 8156 views | 0
British hedge fund manager Man Group is buying a 70% stake in Eurex US, the struggling electronic futures market launched in Chicago in 2004, for $23.2 million in cash.
Eurex, which is co-owned by Deutsche Börse and the SWX Swiss Stock Exchange, said in January that it was holding talks with a number of parties regarding a partnership for the loss-making business.
In a statement Deutsche Börse says Man Group will acquire a majority stake in the business for $23.3 million and also make a capital injection of $35 million into the exchange, which has been re-named US Futures Exchange (USFE).
Eurex launched its US exchange in February 2004 to compete against the Chicago Board of Trade (CBOT) and Chicago Mercantile Exchange (CME) in US Treasury futures trading. But the unit has failed to capture a significant share of the market and has struggled since its launch.
The venture will now aim at providing new products for hedge funds and retail investors, rather than compete against the established futures exchanges in Chicago, says Deutsche Börse.
The UK broker plans to eventually cut its stake in the business to below 50% by selling to other hedge funds and financial services firms. Eurex will retain a 30% stake in USFE.
Commenting on the deal, Kevin Davis, chairman and CEO of Man Financial, the brokerage division of Man Group, says: "Man's long experience serving its global customer base, combined with Eurex's renowned expertise in operating an electronic trading platform, will create a distinct regulated exchange that will give the marketplace additional trading opportunities."
Andreas Preuss, CEO of Eurex, adds: "With this new relationship, Eurex adds a new dimension to its well established core product range. Together with our partner, we will reach out to new target groups with innovative products. USFE will offer products that have not previously been available in an exchange environment."
Davis will serve as chairman of the USFE, while Satish Nandapurkar will be CEO of USFE. The exchange's board of directors will be comprised of representatives of Man Group and Eurex, as well as a number of independent directors.
Deutsche Börse Systems, the developer and operator of the Eurex platform and network, will continue to operate the trading platform and corresponding communications network for the exchange.
Eurex US has an antitrust complaint pending against Cbot and CME, which alleges that the two exchanges tried to illegally block its entry into the US market. Prior to the closing, USFE will transfer its interest in the antitrust litigation to its current owners.