After a protracted battle, Greenwich, Connecticut-based General Atlantic LLC won the auction for a minority stake in the New York Mercantile Exchange (Nymex).
The deal, which still needs approval from Nymex shareholders and the Commodity Futures Trading Commission, will value the exchange at $1.35 billion following General Atlantic’s $135 million investment. The firm will gain a 10 percent stake through the transaction.
General Atlantic boasts a strong track record in the financial services market. The firm is a current investor in electronic exchange Archipelago Holdings and won big on its investment in E*Trade ten years ago.
The Nymex, meanwhile, was a focal point of a number of private equity groups this summer, reportedly attracting bids from Parthenon Capital and a team consisting of The Blackstone Group and Battery Ventures, as well as a late offer coming from former Nymex chairman Michel Marks, reportedly backed by Hellman & Friedman. Based on published reports, the bidding ultimately came down to General Atlantic and the Blackstone/Battery partnership.
Originally, the plan was to acquire a 20 percent stake in the Nymex, but the exchange cut that back a bit and only offered a 10 percent slice.
In the press release, current Nymex chairman Mitchell Steinhause said, “Over the course of several months, we evaluated a number of bona fide investors, as well as other alternatives…this transaction provides Nymex with the right balance of continued autonomy, open outcry trading protection and an attractive valuation.”
The Marks-led bid reportedly valued the Nymex at $1.4 billion, which would imply the winner was not solely chosen on price.
Private equity, as an industry, has been actively shopping the financial exchange market in recent years. In 2003, GTCR Golder Rauner agreed to acquire the American Stock Exchange, although that transaction fell apart soon after, and most recently PE bidders were said to be eyeing the Chicago Board of Trade (CBOT). Also, the NASDAQ paired up with Silver Lake Partners in the acquisition of the Instinet Group, and when the New York Stock Exchange was put in play earlier this year, bidder Kenneth Langone reportedly recruited the help of an unnamed private equity group. That deal never materialized, and the NYSE is set to merge with General Atlantic investment Archipelago Holdings in the first quarter of 2006.
For the Nymex deal, JP Morgan Securities advised the sellers, while Skadden, Arps, Slate, Meagher, & Flom LLP served as legal counsel.
General Atlantic declined comment for this story.