(Bloomberg) -- Futures trading giant CME Group Inc. (NASDAQ:CME) proposed to buy Michael Spencer’s NEX Group Plc for an equity value of about 3.8 billion pounds ($5.4 billion).
NEX said it received a non-binding proposal for the acquisition at 10 pounds per share, according to a statement Wednesday. The talks are at an advanced stage and a deal may not be reached, the company said. Shares of NEX jumped as much as 11 percent after Bloomberg News reported the talks.
Acquiring NEX, which runs markets for trading currencies and Treasuries, would complement the Chicago-based company’s operations as CME offers derivatives on many of the same things. CME Chief Executive Officer Terry Duffy has built a powerhouse in part through takeovers, including deals for the Chicago Board of Trade and New York Mercantile Exchange.
Potential bidders such as London Stock Exchange Group (LON:LSE) Plc and IHS Markit Ltd. may approach NEX with their own offers now that CME has shown its hand. Interest could also come from Deutsche Boerse (DE:DB1Gn) AG or Singapore Exchange Ltd., according to Marcus Barnard, an analyst at Numis Securities.
The offer is 49 percent higher than London-based NEX’s closing price on March 15, before the approach was reported by Bloomberg News. CME’s stock rose 0.1 percent to $159.21 at 12:42 p.m. in New York on Wednesday. NEX climbed 9.8 percent to 972 pence in London.
NEX dominates electronic Treasury trading. Its fixed-income division is home to about 80 percent of trading volumes in a $14.5 trillion market. CME enjoys a near-monopoly over trading of Treasury futures. Putting cash and derivatives trading under the same roof at CME would save major banks millions of dollars a year by enabling them to set aside less collateral.
Read more: Wall Street could get bundle of savings from deal
It’s a similar story in foreign exchange markets. NEX’s platforms for trading currencies are among the world’s biggest, while CME oversees massive volumes in futures on euros, pounds, yen and others.
The deal would be Duffy’s biggest since he bought Nymex Holdings Inc. in 2008. Shares of CME have more than tripled since 2011 as the company has benefited from increased volume in derivatives trading.
NEX shares have advanced more than 30 percent since Bloomberg broke the news of the talks on March 15, boosting its market value to more than 3.7 billion pounds and cementing Spencer’s position as a billionaire.
Wednesday’s rally increases Spencer’s fortune by 55 million pounds, pushing the 62-year-old French wine devotee’s net worth to 1.03 billion pounds. It’s quite a turnaround for a man who five years ago was only worth 389 million pounds, according to calculations by Bloomberg Billionaires Index. Spencer owns about 16 percent of NEX and 1 percent of TP ICAP (LON:NXGN), the company that bought the ICAP name at the end of 2016.
Read more: how Michael Spencer’s fortune has grown over the last five years
NEX’s roots date back more than 30 years to a brokerage called Intercapital, founded by Spencer. That firm eventually grew to become the world’s biggest broker of deals between banks. The former Conservative Party treasurer sold a part of his company and the ICAP name to Tullett Prebon for $1.6 billion at the end of 2016, leaving NEX focused on electronic trading and post-trade services.
