Deutsche Börse buys proxy advisor ISS

D.he Deutsche Börse has finally struck gold in its search for a billion-dollar acquisition in the form of voting rights advisor Institutional Shareholder Services (ISS). 80 percent of the company valued at around 1.9 billion euros is to be acquired by the financial investor Genstar, as the stock exchange operator listed on the Dax announced on Tuesday evening in Frankfurt. After opening trading on Wednesday, the share price of the German stock exchange rose by more than 2 percent, which made the paper the current best Dax value.

Genstar and the ISS management should continue to hold a 20 percent stake. Deutsche Börse wants to pay the purchase price with one billion euros in debt and the rest with cash. The share rose slightly before the market.

Deutsche Börse boss Theodor Weimer, who has been in office since the beginning of 2018, has been looking around for suitable takeover targets for a long time – recently, however, he had always lost out on larger deals and caught smaller fish. With acquisitions, especially outside the equity business or the associated derivatives area, he wants to make the group even more independent of the strong fluctuations in these markets. In comparison with competitors like Euronext, Deutsche Börse is already very broadly positioned.

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To the detailed view

ISS is another acquisition that fits into this strategy. Based on the expected net sales for 2020 of more than 280 million dollars (around 236 million euros), the company will contribute less than ten percent to sales. The organic revenue growth forecast by 2023 by an average of more than five percent fits in with Weimer’s growth strategy. The margin adjusted for special effects based on earnings before interest, taxes, depreciation and amortization (Ebitda) at ISS of around 35 percent is well below the Group figure. Weimer sees potential here through the takeover.

The sales synergies should lead to an additional operating profit of 15 million euros per year by 2023. The partnership would open growth opportunities for both companies because the activities were complementary. ISS provides institutional investors with data and corporate governance services. “The ESG expertise and the range of services from ISS on the data side perfectly complement Deutsche Börse’s business model across the entire value chain,” Weimer said on Tuesday evening, according to the announcement.

Strategy summit in London

On Wednesday afternoon he wants to present his goals and strategy for the coming years to investors. In the past three years, Weimer has succeeded in calming down the group after the turbulent phase under the former boss Carsten Kengeter, including the failed merger with the London Stock Exchange (LSE) and insider allegations. So far, his course has been honored on the financial market. During his tenure in office, the stock market value rose by almost 40 percent to 25 billion euros in the past few weeks, despite a weak phase.

This makes the Deutsche Börse share one of the most successful German standard stocks during this period. Internationally, however, it doesn’t look so good. The LSE share gained more than 100 percent during this period. The London exchange operator, which is about to take over the data provider Refinitiv for $ 27 billion, is currently valued at 30 billion euros. US stock exchange operators like the CME or the Intercontinental Exchange are playing in a different league with the equivalent of 50 billion euros and 47 billion euros, respectively.


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