Deutsche Börse AG

M&A Activity • Apr 30, 2007

News Details

Ad-hoc | 30 April 2007 18:35

Deutsche Börse AG’s subsidiary Eurex and ISE to create largest transatlantic derivatives marketplace

Deutsche Börse AG / Acquisition

Release of an Ad hoc announcement according to § 15 WpHG, transmitted by
DGAP - a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.

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Following the required board approvals, Eurex Frankfurt AG and
International Securities Exchange (ISE) announced today that they have
signed a definitive agreement under which Eurex will acquire ISE for
approximately USD 2.8 billion in cash. ISE will continue to operate as a
separate entity under SEC regulation in its current governance structure
and under the ISE brand. ISE’s full management intends to remain in their
positions.
In the merger, Eurex will pay ISE shareholders USD 67.50 in cash for each
of their shares of ISE stock. The combination will be implemented by way of
a merger between ISE and a subsidiary of U.S. Exchange Holdings Inc.,
itself a Eurex Frankfurt AG subsidiary. The transaction is subject to
approval by the holders of a simple majority (50 percent plus one share)
of ISE outstanding common stock at a special shareholder meeting to be held
as soon as practicable, receipt of regulatory approval by the U.S.
Securities and Exchange Commission and other customary closing conditions.
The partners expect the transaction to close in Q4/2007.
Eurex is a joint venture between Deutsche Börse AG and SWX Swiss Exchange
which will provide the necessary financing as parent companies. Deutsche
Börse AG will contribute 85% of the total purchase price and SWX 15%
thereby remaining in line with the economic interests that both companies
have in the Eurex Joint Venture.
The combined group will be the largest transatlantic derivatives
marketplace with powerful distribution capabilities in two of the world’s
most important capital markets. The combination will be home to the Euro
zone interest rate and equity index benchmark derivatives products and will
offer options on all major U.S. and European companies. Combining the two
companies offers significant growth opportunities through cross selling of
existing products in both markets, as well as through the introduction of
new products in the future.
The combination will create significant value for Deutsche Börse AG’s
shareholders and SWX Swiss Exchange. Total estimated pre-tax synergies of
USD 50 million p.a. have already been quantified. 50% of the total
synergies will be achieved in 2010 and full run rate synergies in 2012. Of
the total some USD 15 million p.a. are attributable to efficiency gains. An
additional approximately USD 35 million p.a. come from revenue synergies
mainly through the cross selling of existing products. Both partners
strongly believe that the joint product development experience and
capability will result in further growth opportunities across asset classes
and geographies. This additional potential is not included in the total
synergies.
Deutsche Börse AG is planning to finance its share of the purchase price
initially through a bridge loan facility of approximately EUR 1.5 billion
(approx. USD 2 billion) and cash on hand at the time of closing. This
bridge loan will be taken out through retention of future earnings
(approximately EUR 200 million, approx. USD 270 million) and a mix of
senior and hybrid debt (approximately EUR 1.30 billion, approx. USD 1.77
billion). This long term financing structure aims at optimizing the capital
structure of Deutsche Börse Group, i.e. entering in a so called ringfencing
structure including the necessary adaptation of the legal structure of
Deutsche Börse Group. This structure is currently under development as
reported at the annual results conference in February 2007. With this
structure Deutsche Börse AG moves from a net cash to a net debt position
thereby reducing its cost of capital and thus increasing its capital
efficiency. Deutsche Börse AG also plans to continue with its progressive
dividend policy. Share buy backs under its current capital management
program will start again once financial ratios are restored.
ISE is the world’s largest equity options exchange, providing electronic
trading in USD denominated equity options, index options and FX options.
ISE traded 600 million contracts in 2006 and has 164 member firms in the
U.S. ISE recently launched a stock exchange and operates an alternative
markets platform.
Eurex, a joint venture by Deutsche Börse AG and SWX Swiss Exchange, has a
diversified portfolio of Euro denominated fixed income, index and equity
derivatives. Since its inception in 1998 Eurex has grown to become the
largest derivatives market in the world. Eurex lists some of the world’s
most actively traded derivatives, including the global benchmark products
Euro Bund future and Dow Jones Euro STOXX 50 future. Eurex has 393 members
in Europe, the US and Asia and traded 1.53 billion contracts in
2006.

Contact:
Walter Allwicher
Tel.: +49-69-21 11 15 00

DGAP 30.04.2007

Language: English
Issuer: Deutsche Börse AG
Neue Börsenstraße 1
60487 Frankfurt am Main Deutschland
Phone: +49 (0)69 211 - 0
Fax: +49 (0)69 211 - 1 20 0
E-mail: info@deutsche-boerse.com
www: www.deutsche-boerse.com
ISIN: DE0005810055
WKN: 581005
Indices: DAX
Listed: Amtlicher Markt in Frankfurt (Prime Standard); Freiverkehr in
Berlin-Bremen, Hannover, München, Hamburg, Düsseldorf,
Stuttgart; Terminbörse EUREX

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