(Reuters) – Nasdaq (NDAQ.O) said on Monday it will buy software company Thoma Bravo Adenza for $10.5 billion in the exchange operator’s largest acquisition yet, as it accelerates its push to become more technology-focused. a company.
Nasdaq, like its peers, has been on a buying spree to diversify its portfolio of technology and intellectual property after regulations in 2005 opened the stock trading market to competition from brokers.
Since then, Nasdaq bought OMX Northern Markets in 2007 for $3.7 billion, plowed $1.1 billion into the international stock exchange in 2016, and acquired financial crime-fighting software company Verafin in 2020 for $2.75 billion.
Still, its shares fell nearly 10% to $52.39 Monday morning amid concerns that it was overpaid for Adenza. The transaction includes $5.75 billion in cash and 85.6 million shares of Nasdaq common stock.
“Nasdaq was a $28 billion company benefiting from a $10.5 billion acquisition deal to drive 18 times returns from private equity sellers. That’s a lot for shareholders to deal with,” said Michael O’Rourke, chief market strategist at Jones Trading.
The company said it intends to issue approximately 15% of the shares to the owners of Adenza, which is controlled by Thoma Bravo, as part of the deal. The private equity firm will also have the right to appoint a nominee to the Nasdaq Board of Directors.
“Investors are not happy with the premium paid to Adenza at 31 times 2023 EBITDA earnings, especially since it has been so focused on reducing its leverage,” said Andrew Bond, an analyst at Rosenblatt Securities. .
But Nasdaq said the purchase of Adenza is expected to raise the organic revenue growth forecast in the medium term for the solutions companies, which design and develop financial programs for investors, from 7%-10% to 8%-11%.
The deal is expected to close within six to nine months.
Nasdaq added that Adenza, which makes software used by banks and brokerages, is expected to generate about $590 million in annual revenue for 2023.
“Our clients are also investing to integrate emerging technology into their businesses, particularly artificial intelligence and the cloud. We believe these trends will only intensify in the future,” CEO Adena Friedman said on a conference call with analysts.
Nasdaq sells technology products to stock exchanges and other financial companies around the world.
Goldman Sachs & Co. LLC and JP Morgan Securities LLC as financial advisors to Nasdaq, while Qatalyst Partners LP is lead financial advisor to Thoma Bravo and Adenza.
(Reporting by Manya Saini in Bengaluru, Anirban Sen and John McCrank in New York, and Michelle Price in Washington); Additional reporting by Sruthi Shankar. Editing by Nivedita Bhattacharjee
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