NASDAQ OMX held talks with buyout firm Carlyle Group, which could have led to taking the exchange private, shortly after the takeover of NYSE Euronext – parent company of rival exchange the NYSE – by IntercontinentalExchange (ICE), according to media reports.
The talks between NASDAQ and Carlyle, which were initiated by Adena Friedman, Carlyle’s current CFO and former CFO of NASDAQ OMX, broke down over the valuation of the exchange, according to Bloomberg News, the Wall Street Journal, the Financial Times and other media, all citing unidentified people close to the talks.
‘You look at it because it is there and probably cheap. There’s been a big cyclical decline in trading volumes and initial public offerings,’ says the head of private equity at a large buyout group, quoted by the FT. ‘The bet would be on a cyclical rebound, but increasingly exchanges are being disintermediated by dark pools and exchange-traded fund platforms, and fees are under pressure.’
News of the talks comes after a flurry of buyout bids for exchange companies that, when tallying both the successful and unsuccessful bids, have topped $50 bn since 2010, according to Bloomberg data. Activity has heightened in recent years as income from charges on securities trading has dropped and falling share prices have left exchanges cheap in the eyes of many potential buyers. NASDAQ has taken advantage of its own lower valuation in recent years to buy back more than $1 bn of its own stock.
In December 2012 commodity futures exchange ICE agreed to acquire NYSE Euronext for $8.2 bn, a value 38 percent above the market price at the time. The takeover came about a year after US authorities blocked a planned buyout of NYSE Euronext by ICE and NASDAQ on the grounds that the new group would dominate US stock listings. The takeover of NYSE Euronext came a month after a failed offer for the exchange by Warren Buffet’s Berkshire Hathaway.
Early last year, Hong Kong Exchanges & Clearing agreed to buy the London Metal Exchange for about $2.2 bn in the Hong Kong bourse’s first international acquisition, beating ICE in the bidding process.
