America's NASDAQ (National Association of Securities Dealers Automated Quotations), the second-largest stock exchange in the world by market capitalization, is set to acquire a crypto-friendly Swedish financial technology (fintech) firm Cinnober. The exchange has made a public offer of USD 190 million all cash to the shareholders and warrant holders of Cinnober, a global independent provider of exchange technology. Cinnober has had a positive stance on digital assets and cryptocurrencies. For instance, in July of this year, Cinnober partnered with BitGo, a blockchain security company to provide solutions to cryptocurrency exchanges.
Nasdaq expects the transaction to meet the company’s 10% 3-5 year return on invested capital (ROIC) objective, and to be accretive to non-GAAP (generally accepted accounting principles) earnings per share (EPS) within 12 months of closing. The acquisition of Cinnober is expected to deliver attractive shareholder returns with a combination of Cinnober’s largely-recurring revenue base, coupled with significant synergies arising from product enhancement, cross-sale, and efficiency opportunities.
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Nasdaq will fund the acquisition with either cash on hand or liquidity available under existing credit facilities, and the existing capital deployment priorities include funding attractive organic investment opportunities, continuing its dividend growth and share repurchase objectives, as well as achieving a “mid-2x’s” gross debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio by mid-2019.
Nasdaq expects to acquire Cinnober through a wholly owned subsidiary at a price of SEK (Swedish Krona) 75 per share and SEK 85 per warrant. The transaction represents an offer value of approximately SEK 1,702 million (approx. USD 190 million). The Board of Directors of Cinnober has unanimously recommended that shareholders and warrant holders accept the offer. The acceptance period of the public tender offer is expected to close during the fourth quarter of 2018, subject to certain conditions customary in Swedish public tender offers (e.g. that Nasdaq becomes the owner of more than 90% of the shares in Cinnober and review by relevant competition authorities).
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Adena Friedman, President and CEO, Nasdaq said: “The combined intellectual capital, technology competence and capabilities of Cinnober and our Market Technology business will expand the breadth and depth of our fastest growing division at Nasdaq.”
Friedman further added that the global capital markets have continued to evolve rapidly and new marketplaces in various industries are demanding market technology infrastructure that enables rapid growth and scale. The acquisition of Cinnober is expected to enhance Nasdaq's ability to serve market infrastructure operators worldwide and is expected to accelerate its ability to expand into new growth segments.
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Nils-Robert Persson, co-founder and Chairman of the Board of Directors of Cinnober said: “Since co-founding Cinnober in 1998, Cinnober has been on an exciting journey and has become a leading supplier of financial technology providing services to exchanges and trading houses worldwide. I see the offer as the next step in Cinnober’s development as it will enable Cinnober and its highly talented employees to be even more successful in serving customers as well as expanding its technology and offering to even more customers and segments. I really believe in the strategic logic of combining Cinnober and Nasdaq’s Market Technology business also as it reinforces the strong technology foundation in Sweden. As the largest shareholder of Cinnober, I am supportive of the offer and intend to accept the offer.”