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CBOE Holdings Prices Notes to Partly Fund Bats Acquisition


CBOE Holdings, Inc. CBOE has priced underwritten public offering of $650 million of its 3.650% senior notes due 2027. This offering is anticipated to close on Jan 12, 2017.

The Chicago, IL-based exchange operator expects that the net proceeds from the offering will be around $643 million, after deducting the underwriting discount and estimated offering expenses.

Joint book-running managers for the transaction, include Citigroup Global Markets Inc. – a unit of Citigroup Inc., Morgan Stanley & Co. LLC – an arm of Morgan Stanley MS, and J.P. Morgan Securities LLC – a unit of JPMorgan Chase & Co. JPM.

Utilization of the Net Proceeds

CBOE Holdings plans to use part of the net proceeds in partially funding its proposed acquisition of Bats Global Markets BATS, a global operator of exchanges and services for financial markets. This partial funding also includes payment of related fees and expenses as well as the repayment of existing indebtedness of Bats. The company intends to utilize the remaining part of net proceeds for general corporate purposes. It may also invest in short-term marketable securities.

On Sep 26, 2016, CBOE Holdings had announced that it would acquire Bats Global in a cash plus stock deal. The purchase consideration of $3.2 billion consists of 31% cash and 69% CBOE Holdings’ stock. The acquisition, anticipated to close in the first half of this year, will considerably expand CBOE Holdings’ product line, broaden its geographic reach, and diversify the business mix. Notably, the deal is expected to be accretive to CBOE Holdings’ adjusted EPS in the first year, post closure of the transaction.

In the latest release, CBOE Holdings stated that the closing of the senior notes offering is expected to occur before the consummation of the acquisition. In the event, the acquisition is not completed for any reason on or before Oct 23, 2017, CBOE Holdings will be required to redeem the notes in a special mandatory redemption.

Stock Performance

Over the past one year, CBOE Holdings’ shares increased 17.9%, underperforming the 24.4% gain for the Zacks categorized Securities Exchanges industry. However, we see potential upside for the stock in the near term. The company remains focused on expansion of its proprietary product offering, while extending its global customer reach. Diversified product portfolio and core competencies fuel its growth prospects. Additionally, the company is set to benefit from the Bats Global acquisition.

CBOE Holding currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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