Canada's TMX buys ICE's Trayport energy trading platform

TORONTO (Reuters) - Toronto Stock Exchange owner TMX Group Ltd X.TO said on Friday it will buy Trayport, a London-based energy trading software firm, from Intercontinental Exchange Inc ICE.N for C$931 million ($723 million) for more global exposure and the recurring revenue.

As part of the deal, TMX will sell Natural Gas Exchange Inc (NGX) and Shorcan Energy Brokers Inc to ICE and pay the remaining C$592 million value of the deal in cash.

“It’s on point with their strategy. It improves the revenue mix” for TMX, said National Bank Financial analyst Jaeme Gloyn, who estimates Trayport will add 6 percent to its earnings before interest, taxes, depreciation and amortization in the first 12 months after the deal closes.

TMX shares were last up 1.5 percent at C$67.51, while ICE was down 0.3 percent at $65.38.

“This is a much stronger, more stable business than NGX, which is based on trading contracts,” Gloyn said, adding that Trayport enjoyed mostly recurring revenue from a loyal group of customers, particularly in Europe.

TMX is broadly seeking to expand its business outside of North America and create higher-value services out of the vast amount of data it generates.

It had sought to use blockchain technology to speed up and simplify trading on NGX.

ICE, owner of the New York Stock Exchange, said in July it would sell Trayport after losing an appeal to overturn a decision by Britain’s competition watchdog that asked for a divestment to preserve competition in the utility derivatives trading industry.

The regulator contended that traders, brokers, exchanges and clearing houses that compete with ICE in the trading and clearing of European utilities derivatives depend on the Trayport platform to carry out these transactions effectively.

The UK Competition and Markets Authority (CMA) has approved the sale of Trayport to TMX Group.

Earlier this year, TMX sold its information services business TMX Atrium to ICE, and on Friday TMX said the two companies had agreed to explore greater collaboration.

TMX said National Bank of Canada is providing a loan of C$650 million to fund the deal.

Barclays is acting as financial adviser to TMX Group.

Reporting by Alastair Sharp in Toronto and John Benny in Bengaluru; Editing by Savio D’Souza and Jeffrey Benkoe