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CME Group to acquire NEX Group in $5.5B deal

Chicago-based derivatives trading giant CME Group Inc. agreed to acquire NEX Group PLC in a transaction valued at £10 per share, in line with the nonbinding proposal disclosed a day earlier by London-based NEX.

NEX is a provider of currency and fixed-income platforms, and other over-the-counter post-trade products and services.

The terms of the acquisition value each NEX share at 1,000 pence and NEX's entire issued and to be issued share capital at approximately £3.9 billion ($5.50 billion).

Under the terms of the deal, NEX shareholders will be entitled to receive 500 pence in cash and 0.0444 share of CME Group class A common stock for each NEX share they own. The transaction valuation is based on CME Group's March 28 closing price of $158.84.

NEX shareholders will also be entitled to a dividend in respect of the year to March 31, which will not exceed 7.65 pence per share.

The transaction is expected to be immediately accretive to CME Group's adjusted cash EPS, with run-rate cost synergies of $200 million annually by the end of 2021, assuming deal completion in 2018. CME Group will incur one-time cash costs of $285 million in association with the acquisition, but expects to maintain its variable dividend structure — at a more modest level in 2018 — while de-levering in the near term.

The transaction has been approved unanimously by the boards of both companies. Pending approvals from regulators and NEX shareholders, the deal is expected to close in the second half of 2018.

Following completion of the acquisition, NEX CEO Michael Spencer will join CME Group's board. Spencer will remain with the combined company as a special adviser, and will also be ambassador for the combined company.

The combined company will be based in Chicago and maintain a European headquarters in London.

J.P. Morgan is acting as lead financial adviser and Barclays is acting as financial adviser to CME Group, and Skadden Arps Slate Meagher & Flom LLP is acting as CME Group's legal adviser. Evercore and Citi are acting as financial advisers to NEX, and Clifford Chance LLP is acting as its legal adviser.