Monday 16 July 2018

CME makes £3.9bn swoop on Nex Group, but warns over job cuts

The groups confirmed around 16% of their combined workforce is expected to be axed if the deal goes through.

Nex Group and US futures exchange giant CME have warned over plans to slash 16% of their workforce after agreeing a £3.9 billion tie-up (PA)
Nex Group and US futures exchange giant CME have warned over plans to slash 16% of their workforce after agreeing a £3.9 billion tie-up (PA)

By Holly Williams, Press Association Deputy City Editor

UK financial-technology firm Nex Group has agreed to a £3.9 billion takeover by US futures exchange giant CME, but the pair warned over plans to slash around 750 jobs after the deal.

The groups confirmed around 16% of the combined workforce is expected to be axed following the tie-up and said there will be potential office closures.

The combined firm’s operations, IT, and selling, general and administrative functions are expected to be in line for cuts in the first three years following completion of the deal, they said.

They also cautioned that there may be offices shut where they both have sites in London, New York, Singapore, Hong Kong, Tokyo, Beijing and Sydney.

Nex – which employs around 2,000 staff worldwide – will see its London headquarters merged with CME’s, which is based in Chicago, although the firms said their European HQ will be based in London in a boost to the City amid Brexit talks.

The acquisition will allow us to create significant value and efficiencies for our clients globally CME chairman Terry Duffy

Nex founder and chief executive Michael Spencer – the former treasurer of the Conservative Party – will join the CME board and will remain with the combined group as a special adviser.

He will also act as ambassador for the combined company working with key clients, regulators and officials in EMEA and Asia.

The deal, which follows weeks of talks, will create a global markets giant, combining the world’s largest futures exchange with Nex’s expertise in currency and sovereign debt markets.

Nex – formerly known as Icap – also owns assets that process millions of derivatives, equities and currency deals.
The deal is expected to complete in the second quarter.

Mr Spencer said it was “an industry-changing transaction”.

He said: “Bringing together cash and futures products and OTC services will be unique, offering clients improved access to trading, greater financial efficiencies and highly valuable data sets.

“The technology and innovation opportunities will be diverse and extraordinary. Clients will be better served.”

He added that CME’s decision to choose London as its European HQ was a “signal of tremendous support for Britain’s financial services sector”.

Terry Duffy, chairman and chief executive of CME, said: “At a time when market participants are seeking ways to lower trading costs and manage risk more effectively, the acquisition will allow us to create significant value and efficiencies for our clients globally.”

CME is hoping to make cost savings of around 200 million US dollars (£142 million) a year after the Nex takeover.

Justin Bates, an analyst at Liberum, said the £10 a share cash-and-stock offer price shows CME is “clearly aiming to deter any competitive threat”.

But he added: “This is a good price, however the 50% cash component might be a little disappointing for some and thus leaves the door ajar for a competing offer with a higher cash component.”

Nex’s forerunner Icap was founded by City grandee Mr Spencer in 1986 and was the world’s largest interdealer brokerage – which involves brokering deals in complex derivatives products between banks.

It then sold its brokerage arm in 2016 to rival Tullett Prebon to focus on electronic trading and financial technology, rebranding itself as Nex.

For CME, the takeover will be its biggest since it acquired New York Mercantile Exchange for around 10 billion US dollars (£7.1 billion) in 2008.

CME employs around 2,800 staff worldwide.

Press Association

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