June 12 (Reuters) – Nasdaq (NDAQ.O) said on Monday it would buy Thomas Bravo-owned software company Adenza for $10.5 billion. This is the exchange’s largest acquisition to date and is intended to accelerate its commitment to more tech-focused companies. company.
Like its peers, Nasdaq has been making acquisitions to diversify its portfolio of technology and intellectual property since 2005 regulations left the stock exchange market open to competition from brokers.
Since then, Nasdaq bought Nordic market owner OMX for $3.7 billion in 2007, invested $1.1 billion in international stock exchanges in 2016, and bought financial crime software firm Bellafin for $2.75 billion in 2020. bought for million dollars.
But the company’s shares fell nearly 10% to $52.39 Monday morning on concerns that Adenza was being paid too much. The transaction consists of $5.75 billion in cash and 85.6 million shares of Nasdaq common stock.
“The Nasdaq was a $28 billion company, but it used leverage to make a $10.5 billion acquisition to pay 18 times its earnings from private equity sellers,” said Michael O’Rourke, chief market strategist at Jones Trading. This is an amount that shareholders have to deal with.”
The company said it intended to issue a nearly 15% stake to owners of Thoma Bravo’s Adenza as part of the deal. The private equity firm will also have the right to nominate candidates for the Nasdaq board of directors.
Rosenblatt Securities analyst Andrew Bond said, “Particularly with Adenza’s focus on de-leveraging, we’re paying for Adenza at 31x earnings before interest, tax and depreciation (EBITDA) in 2023.” Investors are not happy with the premium.” .
But Nasdaq said the acquisition of Adenza is expected to boost medium-term organic earnings growth prospects for its solutions business, which designs and develops financial software for investors, to 8-11% from 7-10%. rice field.
The transaction is expected to close within 6-9 months.
Adenza, which makes software used by banks and brokerage firms, is expected to reach annual sales of about $590 million in 2023, Nasdaq added.
“Our customers are also investing to incorporate emerging technologies, especially artificial intelligence and the cloud, into their businesses,” Adena Friedman, CEO, said on a conference call with analysts. I believe it will be stronger in the future,” he said.
Nasdaq sells technology products to other exchanges and financial companies around the world.
Goldman Sachs & Co. LLC and JP Morgan Securities LLC are financial advisors to Nasdaq, and Qatalyst Partners LP is lead financial advisor to Thoma Bravo and Adenza.
Manya Saini in Bangalore, Anirvan Sen and John McCrank in New York and Michelle Price in Washington. Additional reporting by Sruthi Shankar.Editing: Nivedita Bhattacharye
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