IntercontinentalExchange (NYSE: ICE), a leading operator of regulated global derivatives exchanges and over-the-counter (OTC) markets, announced the completion of its acquisition of Creditex Group Inc. (Creditex), a leader in trade execution and processing of credit default swaps (CDS) in markets spanning the U.S., Europe and Asia. The acquisition was completed on August 29, 2008. ICE expects to file a Current Report on Form 8-K, which will include Creditex's financial information and pro forma financial information, with the Securities and Exchange Commission prior to the close of business today.
Total consideration, including a working capital adjustment, was $513 million, comprised of approximately $461 million in ICE common stock and options and $52 million in cash on hand. The stock and option component of the transaction resulted in ICE issuing 4.7 million shares and approximately 764,000 options to the Creditex stockholders, representing approximately 8% of the issued and outstanding share capital of ICE post-transaction. Creditex Group is now a wholly-owned subsidiary of ICE, operating under the Creditex name with continued leadership by the existing Creditex management team.
"Together with Creditex, we look forward to serving the interdealer CDS market by building on our track record of working closely with dealers, their clients and regulators to provide enhanced operational and risk management tools," said ICE Chairman and CEO Jeffrey C. Sprecher. "The recent development of a portfolio compression platform by Creditex and Markit is just one example of our commitment to meeting the evolving needs of the CDS market through innovation, service and rapid time to market."
"We are thrilled to become a part of ICE, one of the most innovative and fast-moving companies in the industry today," said Sunil Hirani, Creditex Chairman and CEO. "With the transaction complete, we are poised to capture new opportunities, grow our global business and relationships, and combine our leading technologies and management expertise to offer the strongest value proposition to our clients."
Key transaction benefits are expected to include:
- Revenue growth and diversification: ICE will offer OTC execution services to the $60 trillion market for credit derivatives, one of the largest OTC markets today. Creditex employs a hybrid model including a brokerage team and electronic execution of CDS. ICE will also benefit by diversifying into the global CDS markets.
- Expansion into additional OTC markets: Creditex's technology platform today can be applied to a range of OTC asset classes in markets where dealers require efficient, anonymous execution and processing in large notional amounts.
- Addressing needs in OTC infrastructure: This combination positions the company to help address recent calls by the Federal Reserve Bank of New York, the Operations Management Group (OMG), the President's Working Group, U.S. Treasury Secretary Henry Paulson and industry participants for improvements in the operational infrastructure of the OTC markets via the T-Zero electronic processing platform and ICE's successful post-trade assets.
- Addressing needs in risk management: Creditex's technology positions the combined company to offer value-added technology services to help address risk management issues related to cash settlement, curve risk and portfolio compression.
- Revenue and expense synergies: Based on recent results, the transaction is expected to yield $9 million to $14 million in total pretax synergies in 2009, comprising incremental revenues and expense savings.
ICE will hold a conference call on Friday, September 12, 2008, at 9:00 a.m. ET to review financial and guidance impacts of the transaction. A live audio Webcast of the call with accompanying presentation slides will be available on the Investor Relations section of ICE's website at http://ir.theice.com/events.cfm. A call-in number is also available: Domestic 877-856-1964, International 719-325-4771; Passcode 6484462. A replay of the call will also be available starting at 11:00 a.m. ET: Domestic 888-203-1112, International 719-457-0820; Passcode 6484462.
