LONDON, March 8 (Reuters) - London Stock Exchange sold 9 percent of Turquoise to three banks, a sign of confidence in the alternative trading platform, which operates in a crowded market where profit is scarce.
Barclays Bank, JP Morgan Cazenove and Nomura will each pay 1 million pounds for 3 percent stakes, reducing LSE's stake to 51 percent, LSE said, in a deal that would value the whole business at 33 million pounds ($50 million).
Twelve bank shareholders now hold 49 percent, up from nine banks with 40 percent.
'The key thing is they have brought partners into the business who are substantial traders in the market,' said Andrew Mitchell, an analyst at Macquarie.
'It lends additional credibility to the prospects of the business,' he said.
The platform, launched by investment banks in 2008, is one of dozens of new alternative trading venues known as multilateral trading facilities (MTFs) to have emerged in Europe since new EU regulation opened exchanges to competition in 2007.
Many of these platforms are expected to fail or be swallowed up in coming years.
In December, LSE bought a majority stake in Turquoise and merged it with its own 'dark', or anonymous, trading pool called Baikal and got a 60 percent stake in the combined business.
The LSE said in December it had agreed to fully fund the cash needs of the new venture for 24 months to bring it to profitability. It expected the venture to contribute to earnings from the 2012 fiscal year.
Only the first and largest MTF, Chi-X Europe, has so far reached profitability in the fiercely competitive market.
Turquoise ranked as third-largest MTF after Chi-X and BATS in February on 21.8 billion euros in trading volume in the month, according to Thomson Reuters data.
LSE AN IMPROVEMENT OVER HERDING CATS
Having the LSE as a dominant shareholder and decision-maker is a better model than the original ownership group of banks alone, said an executive at one of the other nine banks. 'With nine firms sitting around a table, each with different agendas, it was like herding cats.'
LSE had said in December that it planned to bring in other investors by selling up to 9 percent. Bringing in the three additional banks, which were involved in Baikal, was part of the LSE's original plan for the venture, the bank executive said.
'Our stake in Turquoise underpins Barclays Capital's commitment to providing liquidity and best execution for our clients,' Dixit Joshi, Barcap's head of equities EMEA and Asia Pacific, said in a statement.
LSE has not said the price it paid for the Turquoise stake, only that it would incur exceptional costs of 20 million pounds in the year, including restructuring and integration costs, the write-off of legacy technology costs and contract exit costs.
Nomura's Instinet is also the largest shareholder in Chi-X Europe with a 34 percent stake.
($1 = 0.6590 pound)
(Editing by Will Waterman) Keywords: LSE TURQUOISE/ (jane.baird@thomsonreuters.com, Reuters Messaging: jane.baird.reuters.com@reuters.net, +442075422471) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Barclays Bank, JP Morgan Cazenove and Nomura will each pay 1 million pounds for 3 percent stakes, reducing LSE's stake to 51 percent, LSE said, in a deal that would value the whole business at 33 million pounds ($50 million).
Twelve bank shareholders now hold 49 percent, up from nine banks with 40 percent.
'The key thing is they have brought partners into the business who are substantial traders in the market,' said Andrew Mitchell, an analyst at Macquarie.
'It lends additional credibility to the prospects of the business,' he said.
The platform, launched by investment banks in 2008, is one of dozens of new alternative trading venues known as multilateral trading facilities (MTFs) to have emerged in Europe since new EU regulation opened exchanges to competition in 2007.
Many of these platforms are expected to fail or be swallowed up in coming years.
In December, LSE bought a majority stake in Turquoise and merged it with its own 'dark', or anonymous, trading pool called Baikal and got a 60 percent stake in the combined business.
The LSE said in December it had agreed to fully fund the cash needs of the new venture for 24 months to bring it to profitability. It expected the venture to contribute to earnings from the 2012 fiscal year.
Only the first and largest MTF, Chi-X Europe, has so far reached profitability in the fiercely competitive market.
Turquoise ranked as third-largest MTF after Chi-X and BATS in February on 21.8 billion euros in trading volume in the month, according to Thomson Reuters data.
LSE AN IMPROVEMENT OVER HERDING CATS
Having the LSE as a dominant shareholder and decision-maker is a better model than the original ownership group of banks alone, said an executive at one of the other nine banks. 'With nine firms sitting around a table, each with different agendas, it was like herding cats.'
LSE had said in December that it planned to bring in other investors by selling up to 9 percent. Bringing in the three additional banks, which were involved in Baikal, was part of the LSE's original plan for the venture, the bank executive said.
'Our stake in Turquoise underpins Barclays Capital's commitment to providing liquidity and best execution for our clients,' Dixit Joshi, Barcap's head of equities EMEA and Asia Pacific, said in a statement.
LSE has not said the price it paid for the Turquoise stake, only that it would incur exceptional costs of 20 million pounds in the year, including restructuring and integration costs, the write-off of legacy technology costs and contract exit costs.
Nomura's Instinet is also the largest shareholder in Chi-X Europe with a 34 percent stake.
($1 = 0.6590 pound)
(Editing by Will Waterman) Keywords: LSE TURQUOISE/ (jane.baird@thomsonreuters.com, Reuters Messaging: jane.baird.reuters.com@reuters.net, +442075422471) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.