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CBOE Holdings to acquire Bats Global in $3.2B cash-and-stock deal

CBOE HoldingsInc. agreed to acquire Bats Global Markets Inc. for about $3.2 billion, or$32.50 per Bats share.

The cash-and-stock transaction consists of 31% cash and 69%CBOE stock, based on CBOE's Sept. 23 closing stock price of $70.30 per share.The per-share consideration represents a premium of 22.5% to Bats' Sept. 22closing stock price.

Under the terms of the agreement, Bats stockholders willreceive $10.00 per share in cash and 0.3201 of CBOE common share. The agreementalso allows each Bats stockholder to seek all cash or all stock, subject toproration and adjustment.

CBOE plans to fund the cash portion of the consideration andthe refinancing of Bats' debt through available cash and new borrowings of$1.65 billion, for which it has received fully committed financing from Bank ofAmerica Merrill Lynch.

The transaction is subject to regulatory approvals, approvalof the stockholders of both companies and other closing conditions. Directorsand officers at both Bats and CBOE have signed supportive voting agreements.

The deal is expected to close in the first half of 2017.

The acquisition is expected to expand CBOE's product lineacross asset classes, broaden its geographic reach with Bats' pan-Europeanequities and global foreign exchange positions,and diversify its business mix with non-transactional revenue streams. CBOEplans to use Bats' proprietary trading technology by migrating trading in allof the combined company's markets onto a single platform.

CBOE expects to realize $50 million in annualized costsavings within three years of the deal closing and about $65 million of annualizedexpense synergies within five years following closing. The transaction isexpected to be accretive to CBOE Holdings' adjusted EPS in the first yearfollowing the deal closing.  

Upon closing, CBOE CEO Edward Tilly and CBOE CFO Alan Deanwill remain CEO and CFO, respectively, of the combined company. Bats CEO ChrisConcannon will become president and COO, succeeding CBOE President and COOEdward Provost, who plans to retire at that time.  Chris Isaacson, chief information officer atBats, will succeed Gerald O'Connell in the role, who also plans to retire atthat time. Additionally, the combined company's board will consist of 14directors — 11 currently serving on the CBOE board and three from the Batsboard. These changes will be effective immediately upon closing.

The combined company's corporate headquarters will be basedin Chicago, with business offices in Kansas City, New York and London. It willalso maintain presences in San Francisco, Singapore and Quito, Ecuador.

BofA Merrill Lynch and Broadhaven Capital Partners LLC areacting as co-lead financial advisers to CBOE, while Sidley Austin LLP is actingas its legal counsel. Barclays Capital Inc. is lead financial adviser and UBSInvestment Bank is acting as co-financial adviser to Bats, while Davis Polk& Wardwell LLP is serving as its legal counsel.