Business Context and Reporting Period
This Form 8-K Current Report, filed on April 3, 2013, covers events occurring on April 1, 2013, involving The NASDAQ OMX Group, Inc. (NASDAQ OMX). The filing announces the entry into a Material Definitive Agreement to acquire specific assets from BGC Partners, Inc. and related entities.
Key Financial Metrics and Transaction Terms
- Purchase Price: $750 million in cash payable at closing, subject to adjustments for pre-paid amounts and accrued costs.
- Contingent Consideration: Future issuances of NASDAQ OMX common stock approximating tax benefits, payable ratably over 15 years if revenue targets are met. Based on the stock price on the agreement date, NASDAQ OMX expects to issue approximately one million shares annually.
- Financing: NASDAQ OMX expects to finance the cash portion using cash on hand, incurrence of indebtedness, and/or issuance of securities.
- Bridge Facility: A commitment letter was signed for up to $800 million in senior unsecured bridge loans from Bank of America Merrill Lynch, Deutsche Bank, Mizuho, and SEB to fund the transaction.
Material Changes and Transaction Details
NASDAQ OMX entered into a Purchase Agreement to acquire 100% of the equity interest in eSpeed Technology Services entities, the eSpeed brand, and assets comprising the fully electronic portion of BGC's benchmark on-the-run U.S. Treasury brokerage, market data, and co-location service businesses. The transaction also involves the assumption of certain liabilities.
Key covenants include:
- A three-year non-compete restriction on Sellers regarding fully electronic brokerage of benchmark on-the-run U.S. Treasuries.
- A two-year non-solicitation agreement regarding employees.
- A perpetual, royalty-free license for Sellers to use NASDAQ OMX market data.
Outlook, Risks, and Contingencies
Closing Conditions: The transaction is subject to the expiration of the Hart-Scott-Rodino (HSR) Act waiting period, accuracy of representations and warranties, and compliance with covenants.
Timeline: The transaction is expected to close in the second half of 2013. Either party may terminate the agreement if closing does not occur within 12 months, unless the only unsatisfied condition is antitrust clearance.
Integration: Upon consummation, the acquired business will be integrated into NASDAQ OMX's Transaction Services US and UK business.
Risks: The filing notes that the bridge facility commitments may be reduced by other debt incurred or equity issued prior to closing. The contingent stock issuance is subject to acceleration upon certain events and anti-dilution protections.
Investor Verification Checklist
- Verify the final closing date and whether the HSR Act waiting period has expired.
- Confirm the actual cash consideration paid after adjustments for pre-paid amounts and accrued expenses.
- Monitor the issuance of contingent common stock shares annually over the 15-year period based on revenue targets.
- Review the final terms of the $800 million bridge facility and any permanent financing arrangements replacing it.
- Assess the integration progress of the eSpeed and U.S. Treasury brokerage assets into existing Transaction Services.