April 18, 2024

DealBook: BATS Global Markets Files for $100 Million I.P.O.

Joe Ratterman, chief executive of BATS Global Markets.Natalie Behring/ReutersJoe Ratterman, chief executive of BATS Global Markets.

8:21 p.m. | Updated

BATS Global Markets filed on Friday to go public, after a wave of industry consolidation that has raised speculation that BATS could become a takeover target.

The company, an upstart operator of an electronic exchange, said it planned to sell an estimated $100 million in stock in its initial public offering and use the proceeds for “general corporate purposes.”

BATS, which is the third-largest stock exchange operator in the United States, after Nasdaq OMX and NYSE Euronext, is going public as many of its peers are seeking partners. NYSE Euronext, the owner of the New York Stock Exchange, recently agreed to be acquired by Deutsche Börse. That proposed $10.3 billion deal spurred an aggressive counterbid by two rivals, Nasdaq OMX and the IntercontinentalExchange, which have promised to take their hostile $11 billion offer to NYSE shareholders.

In this shifting landscape, there is increasing pressure on smaller exchange operators, like BATS, to raise capital and expand their businesses. A stock offering could help BATS bulk up, according to analysts.

“This is the next stage for them,” said Daniel T. Fannon, a Jefferies Company analyst. “Getting a public offering afloat gives them brand recognition and currency to expand into foreign markets.”

BATS, based in Lenexa, Kan., has grown rapidly since it was founded in 2005 as a response to the rising power of the Nasdaq and the New York Stock Exchange. At the time, the industry was undergoing significant consolidation. In 2005, both the Nasdaq and the Big Board acquired major electronic trading networks, raising concerns among traders about pricing.

The top shareholders of BATS include Citigroup, Morgan Stanley, Credit Suisse First Boston and Bank of America.

Since it was started, BATS has steadily taken business from its larger rivals. It is now the No. 3 player in the United States, with a 10.8 percent market share of domestic equity trading.

It has also become ambitious abroad. The company recently agreed to buy Chi-X Europe to bolster its trading operations on the Continent, a move that would make it one of the largest electronic exchanges in Europe.

Last year, BATS posted revenue of $834.8 million and profits of $19.8 million.

“They are part of the exchange scene, but they’re on the smaller side; in order for them to continue to grow they need capital,” said Sang Lee, a managing partner of the Aite Group, an advisory firm.

One possibility, according to analysts, is the sale of BATS, which could be an attractive candidate to an international exchange.

“If a foreign exchange wanted to get into the U.S. equity markets, it would buy BATS,” Michael Wong, a Morningstar analyst, said. “It would be a manageable deal that would instantly diversify them by asset class and geography.”

Article source: http://feeds.nytimes.com/click.phdo?i=9bad1bab1d60627ece40908b1133470e

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