Cinnober Shareholders Approve Nasdaq Takeover

Nasdaq is poised to complete its acquisition of Cinnober Financial Technology, after reaching a critical level of acceptance for its all-cash offer among shareholders of the Swedish vendor.

The US exchange operator announced on January 9 that 91 percent of shareholders had accepted its offer for the firm, which values Cinnober at around $220 million. Nasdaq had been forced to revise its offer in late December 2017, after a number of holdout investors said the original asking price had been too low. With its existing holdings, Nasdaq now controls just over 98 percent of the company’s issued shares.

The acquisition of Cinnober comes after a lengthy period of disruption for the vendor, which specializes in post-trade software and counts leading exchange groups among its client base. Cinnober had been struggling with the performance of certain business lines, and its CEO, Veronica Augustsson, departed in the first half of 2018, following a weak 2017 report that saw the firm post a loss of SEK 97.6 million ($10.7 million). Peter Lenardos, a former bank analyst at RBC Capital Markets, took over the reins in August and has implemented a cost-cutting plan, which has seen the cost base reduced by 20.6 percent quarter-on-quarter.

Nasdaq also serves similar client segments in terms of exchange, clearinghouse and surveillance software. A spokesman for Nasdaq says that the company will be integrated with its existing Market Technology business, which effectively serves as its vendor arm.

“Cinnober’s technology, talent, and development capabilities will enable Nasdaq to accelerate strategic initiatives to both extend the breadth and depth of the market infrastructure technology stack and expand into new industries—including segments outside of capital markets,” Lars Ottersgård, head of Market Technology at Nasdaq, tells WatersTechnology. “Cinnober’s client base will also expand Nasdaq’s robust ecosystem of capital markets constituents and further deliver its technology to the markets.”

Under the terms of the revised offer, Nasdaq will pay SEK 87 ($9.62) in cash for each share, and SEK 121 ($13.37) in cash for each warrant. Initially, Nasdaq had offered SEK 75 ($8.29) per share and SEK 85 ($9.39) per warrant. Under the terms of the revised offer, the deadline for acceptance was also extended to January 9, 2019.

With the 91-percent mark reached, Nasdaq says it will commence a settlement on January 17 and initiate a compulsory purchase of any outstanding shares—however, it will allow shareholders who have not yet tendered their holdings to redeem them under the revised offer until January 30. Following that process, Nasdaq will delist Cinnober from Nasdaq First North, their Stockholm-based venue that is part of Nasdaq Nordic.

One possible hurdle remains in the form of a review being conducted by the Competition and Markets Authority (CMA), the UK’s antitrust body. The CMA is currently assessing the deal to determine whether it will initiate an in-depth investigation of competition concerns relating to Cinnober’s acquisition, known as a Phase II inquiry.

If the CMA decides that the deal is anticompetitive, Nasdaq could be forced to divest elements of Cinnober’s business as a remedy to regulatory concerns. Sources indicate that this could include Cinnober’s surveillance business, which directly competes with Nasdaq’s popular Smarts platform, and which was brought into the Cinnober stable after its 2017 acquisition of Ancoa.

However, while the CMA is not due to publish a decision until February 9, Nasdaq took the unusual step of removing the successful outcome of regulatory investigations, such as the CMA’s inquiry, as a precondition for the closure of the deal in its revised offer. Sources close to both firms say that this suggests they are confident of a positive outcome.