BM&FBovespa raises $1.25 billion from CME stake sale to buy rival

SAO PAULO (Reuters) - BM&FBovespa SA BVMF3.SA, Latin America's largest financial exchange operator, on Thursday sold its 4 percent stake in larger peer CME Group Inc in a move aimed at raising funds to buy a Brazilian rival.

A woman takes a picture of an electronic display board at Brazil's BM&FBovespa stock exchange in Sao Paulo October 7, 2013. REUTERS/Nacho Doce

In a securities filing, São Paulo-based BM&FBovespa said the decision to sell the 13.6 million Class A common shares it owned in CME implies the end of a cross-holding agreement with CME CME.O that lasted almost a decade. Terms of the transaction or the identity of the buyer were not disclosed.

Based on CME's closing price of $92.22 on Thursday, BM&FBovespa fetched at least $1.254 billion from the deal. Reuters reported on Wednesday, citing a source, that Cetip SA Mercados Organizados CTIP3.SA had agreed on terms of a revamped, unsolicited offer by BM&FBovespa.

The boards of both BM&FBovespa and Cetip, which is also based in São Paulo, may announce the transaction “within 48 hours,” the source added. The companies declined to comment.

A Cetip takeover will make BM&FBovespa the dominant exchange in Brazil, controlling depositary and clearing activities for all types of financial assets and sourcing investors with proprietary market data. Cetip is Latin America’s largest depositary of financial securities with a vast over-the-counter, fixed-income derivatives operation.


The negotiations followed years of speculation that BM&FBovespa could pursue an unsolicited takeover of Cetip to grow in registration and custody of fixed-income and credit market instruments, segments in which the bourse failed to win market share. The combination will create a company with 40 billion reais ($10.9 billion) in market capitalization.

In the filing, BM&FBovespa said that CME informed it of its intention to hold onto a reciprocate 4 percent stake in the Brazilian firm. Both companies will continue a three-decade long program of operational cooperation, which includes launching joint products and services, the filing added.

Speculation over a further disposal of BM&FBovespa’s CME stake had grown in recent months after the stock went relatively unfazed through recent market turmoil. A slump in Brazil’s currency over the past year helped drive down the value of BM&FBovespa’s stake in CME to about 40 percent of BM&F’s own market value.

BM&FBovespa sold part of the CME stake last September. At the time, the sale netted BM&FBovespa $323 million, according to Thomson Reuters data.

Editing by Richard Chang