TMX Group Ltd., the owner of the Toronto Stock Exchange and various trading platforms, has agreed to acquire an index provider to the exchange-traded fund (ETF) industry, furthering its foray into the realm of financial data. The deal involves the purchase of the remaining 78% stake in VettaFi Holdings LLC, a New York-based company formed last year through the amalgamation of several businesses, including S-Network Global Indexes and Alerian.
TMX Group will pay $848 million to secure the outstanding ownership stake in VettaFi, utilizing bank debt for financing, as outlined in a statement released on Wednesday. VettaFi, with $31 billion in assets linked to its indexes, plays a pivotal role in developing indexes utilized by ETF issuers to implement various investment strategies. The company also owns research tools, an online ETF database, and websites catering to financial advisers.
Strategic Move in the Face of Shifting Business Landscape
For TMX Group, this substantial acquisition aligns with its strategy of diversifying its offerings to include a comprehensive range of information and financial data. This move is essential for growth, especially as traditional lines of business, such as cash equities trading, encounter challenges. The strategy echoes similar moves by entities like the London Stock Exchange Group Plc.
In the first nine months of the year, TMX’s equities and fixed-income sales saw a 1% decline, while derivatives revenue experienced a modest 3% increase. VettaFi will integrate into TMX Group’s global solutions, insights, and analytics segment, currently representing about one-third of the company’s revenue.
The implied valuation of the deal is approximately 15.4 times next year’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). TMX Group had previously acquired a 22% stake in VettaFi earlier this year, making the total investment in the business slightly over $1 billion once the acquisition is finalized, expected next month.
This strategic move positions TMX Group at the forefront of the evolving financial landscape, emphasizing the significance of robust financial data offerings in navigating the changing dynamics of the market.
