Today one of my investments the NYSE Euronext stock exchange received a takeover offer announcement by the ICE. ICE evaluates stock exchange from New York at $8.2 billion which represents an upside of 33%.
I have not much money invested in this company, only around 1% of my net worth. I bought the position a few years before and needed to increase my stake two times because the stock price declined after a few months. Within the recent weeks my stock position turned into a loss position.
I'm a long-term investor and I like to stay by my investments for several years if nothing changes. I'm glad to receive this offer because my current investment could be closed with 30% gain and not to forget I received a yearly dividend of around 4%. So my total return is around 40%. Not bad for a three-year investment.
I cannot say if I like to invest the free cash into the new stock exchange leaded by the ICE. It mainly depends on the fact how much dividend the ICE will pay in the future. ICE doesn’t pay dividends for the time being. The yield from NYSE was around 4% and the yield from CME Group is at 3.5%.
As you know I bought recently CME shares because growth and price ratios were attractive for me.
I like companies from the financial sector that come not directly from the banking industry. I cannot identify what kind of assets banks own and what they do with their assets. The banking industry is a very fast acting industry. You can sell assets or buy them in only a few seconds and you can place millions in seconds. I have no big picture about what's happening in this industry.
This is one of the major points why I dislike the whole industry. Stock exchanges and all service provider are a little bit different. Stock exchanges are somehow like a bridge. If you have saved some money from your hard work and you like to invest this money, you need to use this bridge. You could not use it for free, you must pay a fee. You need to pay a commission for investing your money.
The established stock exchanges got more and more pressure from new created companies like BATS or CHI-X. They offered cheaper prices for trades.
It's a process from which I benefit too because my commission rates declined from five bucks per trade to one buck per trade. You don't know how much money I save every year.
The second burden on stock exchanges is that they don't have enough companies which wanted to get listed. Major equities go public in China. That's were growth comes from. External growth via takeover activity is nearly impossible as we have seen by the takeover try from NYSE Euronext at Deutsche Boerse.
Earlier, the ICE tried to take over the NYSE Euronext with help by Nasdaq. The offer was forbidden because the market share of NASDAQ and NYSE were too big. So the current constellation could be allowed. To finance the deal, the Euronext will be sold via listing.
What do you think about the deal? Would you buy shares from ICE? Now or in near future? Let me know in the comments area below!