Deutsche Boerse AG will buy Danish financial software maker SimCorp A/S for about €3.9 billion ($4.3 billion) to expand its data and analytics business, in a deal poised to be the exchange operator’s biggest acquisition to date.
(Bloomberg) — Deutsche Boerse AG will buy Danish financial software maker SimCorp A/S for about €3.9 billion ($4.3 billion) to expand its data and analytics business, in a deal poised to be the exchange operator’s biggest acquisition to date.
The German company will pay 735 kroner ($109) a share in cash, a 39% premium to Wednesday’s closing price, according to a statement. SimCorp said separately that its board recommends shareholders accept the offer.
The purchase would also be a win for Chief Executive Officer Theodor Weimer, the former investment banker who has sought to juice Deutsche Boerse’s growth through deals. The transaction underlines the push that exchanges are making into data and related tools as investors seek information that gives them an edge in increasingly fast electronic markets.
“This transaction makes a lot of strategic and financial sense, it is highly complementary for our existing data and analytics business,” Weimer told reporters on a call on Thursday. “We do cover now the full value chain of the investment management service, this is exactly the piece we were always looking for.”
Within three years, the takeover would generate cost and revenue synergies of a combined €90 million for the exchange, Deutsche Boerse said.
SimCorp will be grouped together with Deutsche Boerse’s Qontigo and ISS units. The company said it has the option of selling shares in the combined Qontigo and ISS business to the public “in the medium term.”
“These are two different pieces, we would only envisage to IPO the US part of the business, the business of Qontigo and ISS,” Weimer said.
General Atlantic, which sold a portfolio and risk analytics business to Deutsche Boerse in 2019, will be the sole minority shareholder of the combined Qontigo entity. Deutsche Boerse wants to “create a path to exit” for the firm via the potential initial public offering, said Weimer.
“We agree that a path to exit is also creating some momentum for us to push this business forward,” Weimer told analysts on a call on Thursday. “Two, three years down the road, if we were to list lets say 30% of the newly combined ISS Qontigo company, this would not create a huge complexity for us at all.”
SimCorp shares jumped when the market opened and briefly exceeded the offer price. The stock traded at 735 kroner as of 10:13 a.m. in Copenhagen. Deutsche Boerse shares fell as much as 7.5%.
“Over the years there have been tons of M&A rumors involving SimCorp, being one of few European independent software vendors with global scope and at decent scale,” Daniel Djurberg, a SimCorp analyst at Handelsbanken, said in a note. “Our base case is that the Deutsche Boerse bid will show to be high enough to pull this transaction through without competing bids, but we don’t rule out the alternative scenario.”
Exchanges have been buying data and software businesses, often with deals that outstrip the size of SimCorp. London Stock Exchange Group Plc completed its purchase of Refinitiv in 2021 and Intercontinental Exchange Inc. seeking to acquire Black Knight Inc.
Yet attempts to diversify sources of revenue haven’t always proved successful. Euronext NV withdrew an indicative offer for investment-platform Allfunds Group Plc last month after both sides were unable to agree on the terms of a takeover.
Weimer signaled that, for now, he is focused on SimCorp rather than pursuing other acquisitions, such as Allfunds.
Execution Risk
“We are no deal junkies,” Weimer told reporters. “We will do this deal, we will make this deal happen, we will continue to be cash generative, that’s very clear. What happens in 18 months, 24 months, it’s not the day today to talk about this.”
SimCorp, which posted €99 million of profit last year, offers an investment management platform that it says has more than $30 trillion managed on it, and it counts as clients 40 of the top 100 global asset managers and asset owners.
“The deal appears to be modestly earnings accretive, but does not substantially alter the revenue growth profile the group,” Citigroup Inc. analysts including Andrew Coombs in London wrote in a note. “We also see high execution risk in this deal, as SimCorp is undergoing a transition period, which the company itself has acknowledged will lead to lower gross margin and higher investment spend near-term.”
The two companies have been working together since 2021 when Deutsche Boerse’s unit Qontigo entered into a partnership with SimCorp. To finance the deal, Deutsche Boerse has a fully underwritten bridge facility with Morgan Stanley, which is expected to be refinanced by a mix of cash and debt.
SimCorp is being advised by Credit Suisse Group AG, a bright spot for the investment bank after a crisis of confidence forced into the arms of larger competitor UBS Group AG last month.
The transaction is expected to be completed in the third quarter, pending regulatory approvals and a minimum acceptance level of 50% plus one share of all SimCorp shares.
–With assistance from Jonas Cho Walsgard.
(Updates to with CEO comments starting in fourth paragraph. An earlier version of this story was corrected after SimCorp corrected the name of a Deutsche Boerse unit)
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