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NEW YORK CITY, New York: Exchange operator Nasdaq has announced that it will purchase software firm Adenza for $10.5 billion, in its largest-ever acquisition aimed at broadening its financial technology capacities.
However, shareholders have expressed concerns.
Owned by Thoma Bravo, Adenza’s risk management and regulatory software is widely used by banks and brokerages.
However, as investors viewed it as an expensive bet, Nasdaq’s shares dropped more than 10 percent to a nearly one-year low following the announcement.
“We have serious reservations about the price Nasdaq has chosen to pay for the asset,” said Morningstar analyst Michael Miller in a note.
The deal values the San Framncisco-headquartered Adenza at almost 18 times its expected 2023 revenue.
If the deal is approved by regulators, Nasdaq will issue $5.9 billion in new debt, boosting the company’s leverage well above previous high points.
“As Adenza is a bit of an unknown asset, it will take time for investors to digest the details,” said Nasdaq CEO Adena Friedman, as quoted by Reuters.
“We think we paid an appropriate price for an exceptional asset, but helping people understand how exceptional the opportunity is, I think, is going to take some time,” she added.
Expected to generate about $590 million in revenue this year, Adenza was created in 2021 when private equity firm Thoma Bravo merged Calypso Technologies with AxiomSL.
As part of the purchase agreement, Thoma Bravo will receive a 14.9 percent stake in Nasdaq, making it one of the exchange’s largest shareholders.
Holden Spaht, managing partner at Thoma Bravo, will also be appointed to Nasdaq’s board.
Analysts have said that the agreement would weaken Nasdaq’s financial risk profile, as the debt it will issue will bring its leverage to historically high levels.
In response, Nasdaq said it aims to considerably reduce its debt levels within 18 months.
The purchase is expected to close within six to nine months.
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