Deutsche Boerse would use ISE sale proceeds for Asia -sources

Fri Jun 6, 2014 8:42am EDT

* D. Boerse mulls ISE sale, sees no time pressure -sources

* Proceeds could bolster growth in Asia -sources

* No obvious buyer for ISE -analysts

* Deutsche Boerse declines comment

By Andreas Kröner

FRANKFURT, June 6 (Reuters) - Deutsche Boerse would like to use the proceeds from an eventual sale of its International Securities Exchange (ISE) unit to fund expansion in Asia, two sources familiar with the thinking of the German exchange operator said on Friday.

The exchange group has been mulling the sale of its U.S. options exchange, but sees likely offer prices as not attractive enough for any move near-term and has mandated no banks to study the issue, the sources said.

"There is no time pressure," one of the sources said.

Deutsche Boerse sees Asia as the mainspring of its future growth and already aims to double revenue from the region to 200 million euros ($272 million) annually by 2017.

Proceeds from the sale of ISE would give Deutsche Boerse additional capacity to invest in India or China, for example, after the group agreed to intensify cooperation with Bank of China and the Shanghai Stock Exchange earlier this year.

Some analysts said they would welcome a sale of ISE, which has not lived up to expectations due to fierce price competition and regulatory obstacles to product approvals since it was purchased by Deutsche Boerse for around $2.8 billion in 2007.

Deutsche Boerse has taken a series of impairment charges on the asset since then, including one of 415 million euros in the fourth quarter of 2009. ISE was valued at 921.3 million euros at the end of 2013, according to Deutsche Boerse's annual report.

ISE is only expected to fetch between $1 billion and $1.5 billion if sold, one of the sources told Reuters.

"We would generally look on a sale in that price range as a positive for the stock, one that might open other opportunities for DB and its shareholders, such as capital return through dividends/buybacks or the acquisition of a property that better fit with its core strategic vision," analysts at BMO Capital Markets commented in a note to clients.

However, finding a buyer may take some time, BMO added.

"Frankly, a logical buyer with deep enough pockets doesn't immediately come to mind, so we'd place relatively low odds on the transaction happening in the near term," it said.

Deutsche Boerse declined comment.

The exchange operator bought ISE after its own attempts to grow failed to take off. The ISE platform was expected to allow it to push into the market for U.S. equity options, complementing its derivatives platform Eurex, which offers trading in European equity options, index options and futures.

But options trading volume has been hit by the introduction of new bank rules which force traders to underpin options bets with more capital. ($1 = 0.7345 Euros) (Writing by Jonathan Gould; Editing by David Holmes)