Deutsche Boerse to Acquire International Securities Exchange for $2.8 Billion

Deutsche Boerse, operator of the Frankfurt stock exchange, agreed Monday to purchase the International Securities Exchange [ISE] for $2.8 billion to create the world's biggest global derivatives marketplace. ISE shares leaped 46% to close at $66.69. The deal values the ISE at $67.50/share, a premium of almost 50% to the shares' Friday close of $45.72. Some analysts believe the rapid growth of options volume could entice other parties to bid for the ISE, including the Chicago Merc and NYSE Euronext. According to analyst Richard Herr, "NYSE has talked about wanting to be bigger in U.S. derivatives and ISE is certainly one of the more attractive properties...NYSE also has the currency to outbid the Deutsche Boerse group." Deutsche Boerse attempted last year to buy Euronext, which merged with the NYSE instead. Deutsche Boerse and the ISE claim the transaction will create $50 million in synergies and immediately contribute to Deutsche Boerse's EPS. Together, they will have a market cap of $20 billion. In related news, The Philadelphia Stock Exchange, the third-largest U.S. options market, has been approached by the NASDAQ and other suitors. "We are talking and have talked to a whole bunch of folks, and we are seriously looking at all our options,'' said Sandy Frucher, chairman of the exchange.

Sources: Wall Street Journal, Bloomberg, Reuters, MarketWatch
Commentary: ISE Exchange May Get $2.6 Billion Bid from Deutsche Boerse -- WSJ • International Securities Exchange Flies Under the M&A Radar • A Look At Stock Exchange Stocks
Stocks/ETFs to watch: International Securities Exchange Holdings (ISE). Competitors: CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings (CME), Nasdaq Stock Market Inc. (NDAQ), NYSE Euronext (NYX), IntercontinentalExchange Inc. (ICE). ETFs: PowerShares Dynamic Mid Cap Growth (PWJ), iShares Dow Jones US Broker-Dealers (IAI), PowerShares Dynamic Aggressive Growth (PGZ), KBW Capital Markets ETF (KCE)

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