Each week, we report instances where the money junky hedge funds, private equity groups and the already big company swallows another piece of the global economy. Here are some of what the BIGS gobbling up last week….
CME GROUP OFFERS $16 BILLION FOR CBOE. CME Group, the world’s largest operator of futures exchanges, has offered to buy Cboe Global Markets, a Chicago commodities exchange, for $16 billion in stock.
CME has offered 75 percent of one of its shares for a full share of Cboe stock, people familiar with the deal’s terms told the Financial Times.
The price values Cboe at about $150 a share, compared to its price of $123 immediately before news of the offer was made public.
CME’s exchanges largely trade physical commodities such as oil and sugar; Cboe deals more in derivatives and other financial instruments.
Cboe also operates the Vix volatility index, stock and stock options exchanges, and an extensive share trading and clearing business in Europe, the FT said.
Volumes of stock options trades have skyrocketed in the last year as more investors bet on the global economic recovery, the FT noted.
The deal would be CME’s biggest buy since it snatched up the New York Mercantile Exchange in 2008 for $7.9 billion in cash and shares, according to the FT.
The futures industry posted $35 billion in revenue in 2019, more than half of which was generated by CME and four other exchanges, including Deutsche Borse, Intercontinental Exchange, London Stock Exchange Group, and NASDAQ, the FT said.
GOLDMAN SACHS’ DIVISION BUYS DUTCH COUNTERPART. Goldman Sachs’ asset management division will buy NN Investment Partners, the asset management operation of NN Group, a Dutch insurance giant, for $1.6 billion, the bank’s biggest buy since David Solomon took over in 2018 as CEO, the Financial Times reported.
NN’s division manages about $355 million in assets, $190 billion of which it manages on behalf of its parent company.
Under the deal’s terms, NN Group will become a client of Goldman Sachs Asset Management, raising Goldman’s portfolio of managed insurance industry assets to $550 billion.
Goldman’s asset management office, with $2.3 trillion under its care, outbid Janus Henderson, Prudential Financial, and UBS asset management to take NN’s assets.
The purchase “helps us scale our asset management platform, particularly by strengthening our position in Europe,” Solomon said in a statement announcing the deal.
“Everything that NN does, we already do and this is adding and accelerating our growth…and continues to help us scale,” he added.
Asset managers are consolidating in a business where costs are rising and fees charged to clients are shrinking or disappearing entirely, the FT said.
Goldman’s revenue from asset management set a record in this year’s second quarter, but about 75 percent of that came from managing the bank’s own money; the NN deal is intended to expand the 25 percent derived from handling money for external clients, the FT reported.
TREND FORECAST: As the BIGS grow bigger without limits, there is little need for advancement and innovation since there is no competition in the fight for market share. Overall, with a few selling the most, there are less consumer choices for wide varieties of products and services that would be available if there were more businesses in the sectors.
Thus, the bigger they get, the more OnTrendpreneur® opportunities will arise to fill product and service gaps the BIGS left empty.
TRENDPOST: “Consolidation” is another word for Bigs buying more and more of our economy.
Consolidation means not only adding to a company’s size, but also to its economic, political, and social clout.
As we have long noted, fewer and fewer corporations are coming to control more and more of our lives.