CME’s pursuit of Nex Group could be gatecrashed by rivals

CME’s pursuit of Nex Group could be derailed by rival exchanges, analysts have said.

The London exchange founded by City titan Michael Spencer could attract interest from rival exchanges around the world.

Potential rivals could include the London Stock Exchange (LSE), Singapore Exchange (SGX), Frankfurt’s Deutsche Boerse and New York Stock Exchange owner Intercontinental Exchange (ICE).

Deutsche Boerse, SGX and LSE would not comment on whether they were thinking about a bid for Nex, while ICE did not respond to requests for comment.

Read more: Shares in UK trading firm Nex soar after approach from US-based CME

It is understood that Blackstone, which was reported as a potential suitor over the weekend, is not interested in pursuing a bid for London-based Nex.

Analysts Liberum described Nex as “an important strategic asset” and said “we would not be surprised to see competing interest”.

On Thursday night Nex announced that it has received an approach from CME sending its shares soaring in trading on Friday.

The value of Nex shares leapt in value by 30 per cent from the close on Thursday to the close on Friday, from 670.5p to 874p. According to stock market rules CME must announce whether it intends to make an offer for Nex by 12 April.

Paul McGinnis of Shore Capital argued that there could be a case of “winner’s curse” if there is a biding war between rival parties, as Nex “was already overvalued given life in the 14 months since the Tullett deal completed has been a lot harder than was expected”.

Read more: This high-profile City boss just sold his shares in new company TP Icap

Nex sold its voice-broking business to Tullett in late 2016, re-branding from Icap to Nex in the process.

In November it announced that it was deepening a cost-cutting exercise after failing to hit half-year profit targets.

“Given the early stumbles, we are therefore not surprised the Nex board has been willing to enter into discussions and, frankly, should lock the CME representatives in the room until they table an offer,” McGinnis said.

Read more: Former KPMG chair drafted in to probe LSE soap opera

Deutsche Boerse and LSE had an unsuccessful round of merger talks last year, before a potential deal was blocked by the European Commission on competition grounds.

LSE's chief executive Xavier Rolet subsequently stood down and is yet to be replaced.

Nex and CME declined to comment.

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