JC Flowers and Co agreed to buy Chi-X Global Holdings LLC’s Australian and Japanese businesses, giving the New York-based private equity firm two exchanges that have battled for more than four years to grab market share from dominant bourse operators.
The acquisition, which also includes technology services unit Chi-Tech Hong Kong, is expected to close this quarter if regulators approve it, a statement said, which did not say what JC Flowers is to pay. Chi-X handles about 11 percent of on-market trades in Australia and less than 2 percent of equity transactions in Japan, data compiled by ASX Ltd and Bloomberg shows. The venue has a larger slice of Australian off-market trades, taking more than half of them last week.
“It’s likely that Australia was attractive due to its solid earnings growth,” Resona Bank Ltd’s asset management division chief Takashi Hiratsuka said. “Chi-X was able to earn more profit in Australia than Japan.”
The sale is the latest part of Chi-X to be portioned off by its backers. Early last month Chi-X sold its Canada unit to US exchange operator NASDAQ Inc.
Another exchange company, Bats Global Markets Inc, bought Chi-X’s European division in 2011.
Nomura Holdings Inc and its coinvestors in Chi-X, including JPMorgan Chase and Co, Bank of America Corp, UBS Group AG and Goldman Sachs Group Inc, have been examining plans to sell the business since last year. Chi-X, created by Nomura’s brokerage unit Instinet LLC, competes with ASX in Australia and Japan Exchange Group Inc in Tokyo.
The venue started in Japan in 2010, before opening in Australia in September 2011. Makoto Nagahori, who runs Chi-X Japan, yesterday said that he is likely to stay on as head of the Tokyo-based operation under JC Flowers. It has been winning business from smaller local brokerages, he said.
“We don’t expect any major changes to the Japanese business with the upcoming change in shareholders,” Nagahori said by telephone. “We’d like to be looking at a 5 to 10 percent share of trading in the not too distant future.”
“The Chi-X businesses have established themselves as successful and innovative alternatives to primary exchanges,” JC Flowers managing director Thierry Porte said in the statement announcing the deal. “We hope to accelerate this growth through continued enhancements to the platform.”
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