UPDATE: LSE In Exclusive Talks To Buy Turquoise Trading
02 October 2009 - 1:54AM
Dow Jones News
The London Stock Exchange PLC (LSE.LN) on Thursday confirmed
that it is in exclusive talks to buy alternative trading system
Turquoise Trading Ltd.
The talks "may lead to a transaction," the exchange said in a
statement, adding that a further announcement will be made in "due
course."
Earlier Thursday, Financial News reported that Turquoise entered
into exclusive talks with the exchange following weeks of a
strategic review. Financial News is published by News Corp. (NWS),
the owner of this newswire.
Turquoise, which is owned by nine U.S. and European investment
banks, and began trading in September 2008, is one of several
"alternative" trading platforms facing trading volume pressure
because of the financial crisis.
Nonetheless, their existence has challenged traditional players,
such as the LSE, with faster and cheaper services.
"Acquiring Turquoise at a low value would make strategic sense
for the LSE, since it will mean we won't have to wait until the
MillenniumIT integration is complete for the LSE to have a
pan-European order book," Arden Partners analyst Sarah Spikes
said.
The exchange bought MillenniumIT, a Sri Lankan software company,
last month for $30 million, as it works to replace its trading
platform with a faster system.
Valuing Turquoise could prove to be difficult, analysts say,
since the banks that own it have provided most of its trading
volume. Once the joint venture is sold, liquidity may dry up.
According to Diego Perfumo, an analyst with Equity Research Desk
in the U.S., the LSE is likely looking for commitments from those
banks to continue routing stock orders to the platform.
"(The LSE) is doing a favor to the banks, taking this out of
their hands to operate it more efficiently, so the exchange would
want to get an order flow commitment," Perfumo said. "The value of
such a deal is zero if there is no commitment from the banks."
Speculation has swirled around the future of Turquoise for
months, after its market share fell heavily in March following the
expiration of liquidity commitments from its nine shareholders.
UBS AG (UBS) was reportedly hired to help Turquoise in the
strategic review, and it sent sales prospectuses to 18 possible
buyers, including Germany's Deutsche Boerse AG (DB1.XE), the NYSE
Euronext (NYX), Nasdaq OMX (NDAQ) and the LSE.
The banks behind Turquoise are Morgan Stanley (MS), Goldman
Sachs Group Inc. (GS), BNP Paribas SA (BNP.FR), Societe Generale SA
(GLE.FR), Citigroup Inc. (C), Deutsche Bank AG (DB), Credit Suisse
Group (CS), UBS AG and Merrill Lynch, now part of Bank of America
Corp. (BAC).
At 1522 GMT, shares of LSE were down 5 pence, or 0.6%, at 851
pence.
-By Patricia Kowsmann, Dow Jones Newswires. Tel
+44(0)207-842-9295, patricia.kowsmann@dowjones.com
(Jacob Bunge in Chicago contributed to this article.)