Cboe Global Markets has agreed to acquire Chi-X Asia Pacific Holdings, an alternative market operator and provider of innovative market solutions, from J.C. Flowers & Co. The terms of the deal were not disclosed. Shares of the global options exchange rose 1.4% to close at $103.06 on March 24.
This acquisition will broaden Cboe’s (CBOE) geographic presence with entry into two key capital markets, Australia and Japan, which will expand its global equities business into the Asia Pacific and extend access to its unique proprietary product suite in the region, the company said.
Cboe intends to fund the transaction with cash on hand and existing credit agreements, if needed. The transaction, which awaits regulatory approvals, is likely to close in the second or third quarter of 2021.
Per Cboe, the purchase price is immaterial financially and is anticipated to be minimally accretive to the company’s adjusted earnings in 2021. Notably, Chi-X Asia Pacific recorded net revenues of $26 million for 2020, up 26% from the prior year. (See Cboe Global Markets stock analysis on TipRanks)
Cboe CEO Ed Tilly commented, “This is an exciting investment in attractive, growing markets that will complement our North American and European operations and provide a foothold in the key Asia Pacific region, positioning us to become a truly global marketplace for our customers.”
On March 4, Piper Sandler analyst Richard Repetto upgraded the stock to Buy from Hold and increased the price target to $108 (4.8% upside potential) from $93.
In a note to investors, Repetto said that the company reported a second month of “across the board” strong volumes in 2021. Therefore, the stock’s valuation seems attractive, with volumes outperforming at current levels.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 5 Buys, 1 Hold, and 1 Sell. The average analyst price target of $107.33 implies 4.2% upside potential to current levels. Shares have increased 28.8% over the past year.
Cboe scores a 9 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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