Bursa Malaysia to buy back 25% stake in derivatives arm

The deal comes as CME Group exercised a put option it inked on Nov 30, 2009, for the sale


BURSA Malaysia Bhd is buying back the 25% equity interest in Bursa Malaysia Derivatives Bhd (BMD) from CME Group Strategic Investments LLC (CMEGSI) for RM162.47 million.

The deal comes as the Chicago-based derivative giant, CME Group Inc, exercised a put option it inked on Nov 30, 2009, for the sale.

In a filing yesterday, Bursa noted its board had on Sept 18 approved the put option price of RM162.47 million for the acquisition of 12.5 million ordinary shares, which represent the remaining 25% equity interest in Bursa Derivatives, and an additional sum which is to be determined later.

The consideration of RM162.47 million for the cash acquisition was arrived at as March 31, 2019, based on the pre-agreed valuation formula as defined in the shareholders’ agreement.

“This takes into consideration the earnings before interest, taxes, depreciation and amortisation (Ebitda) of Bursa Derivatives Group and the enterprise value over Ebitda multiple of 17.8 times which was derived based on 12 listed exchanges as prescribed in the formula.

“The additional sum, which is to be determined later, will be based on the 25% of the 70% of Bursa Derivatives’ operating profit before tax for the second and third quarters of the financial year ending Dec 31, 2019,” Bursa stated in an exchange filing yesterday.

The additional cash sum will be based on the fact that CMEGSI remains a 25% shareholder of Bursa Derivatives until the completion of the deal sche-duled for early December 2019.

Upon completion of the acquisition, BMD will become a wholly owned subsidiary of Bursa Malaysia.

The BMD, meanwhile, has made changes to terms of access to CME’s Globex Services platform that will see BMD contracts continue to be traded on the Globex platform till September 2025.

The local derivatives exchange has also entered into a nonbinding strategic cooperation agreement with the CME to explore new products and other business opportunities that will deliver value to their respective customers.

To recap, Bursa Malaysia sold a 25% stake in BMD to CME in September 2009 as part of a strategic collaboration partnership which saw BMD derivative contracts traded on CME’s Globex electronic trading platform.

The initial period of the existing Globex access agreement is effective until Sept 19, 2020.

“The revision in the tiered fee structure is expected to provide cost savings to BMD annually, while its products continue to have global visibility, accessibility and connectivity to investors,” Bursa said.

“We are happy that CME Group will continue to remain with us for the next stage of an exciting journey,” Bursa Malaysia CEO Datuk Muhamad Umar Swift (picture) said.

CME Group head of Asia Pacific and MD Christopher Fix said he was committed to working with BMD to expand derivatives markets throughout Malaysia and globally.

“CME Group has moved away from holding equity stakes in other exchanges and instead has worked to develop strategic commercial agreements with these institutions to benefit our mutual clients.

“We look forward to continuing to work with Bursa Malaysia through our extended commercial agreement to expand the reach of these derivatives markets around the world,” he said.