Bats Global Markets, Inc. (BATS:BATS) Files An 8-K Other Events
Item 8.01. Other Events.
Settlement of Certain Litigation Relating to the
Merger.
On September 26, 2016, Bats Global Markets, Inc., a Delaware
corporation (Bats) announced that it had entered
into an Agreement and Plan of Merger (the Merger
Agreement), dated as of September 25, 2016, by and among
Bats, CBOE Holdings, Inc., a Delaware corporation (CBOE
Holdings), CBOE Corporation, a Delaware corporation and
wholly owned subsidiary of CBOE Holdings (Merger
Sub), and CBOE V, LLC, a Delaware limited liability
company and wholly owned subsidiary of CBOE Holdings
(Merger LLC). The Merger Agreement provides,
among other things, that, upon the terms and subject to the
conditions set forth in the Merger Agreement, (i)Merger Sub will
merge with and into Bats, with Bats surviving as a wholly owned
subsidiary of CBOE Holdings (the Merger), and
(ii)following the completion of the Merger, the surviving
corporation from the Merger will merge with and into Merger LLC
(the Subsequent Merger), with Merger LLC
surviving the Subsequent Merger and continuing as a wholly owned
subsidiary of CBOE Holdings.
On December 16, 2016, a putative class action lawsuit captioned
Seung Kim, Individually and on Behalf of All Other Similarly
Situated v. Bats Global Markets, Inc., Chris Concannon, Joseph
Ratterman, Alan H. Freudenstein, Robert W. Jones, Jamil Nazarali,
John McCarthy, Chris Mitchell, Frank Reardon and Michael Richter,
Case No. 2:16-CV-02817-DDC-KGG (the Merger
Litigation) was filed in the United States District
Court for the District of Kansas. The Merger Litigation relates
to the Merger Agreement and the definitive proxy statement filed
with the United States Securities and Exchange Commission (the
SEC) on December 12, 2016 (the Proxy
Statement) in connection with the Merger.
Bats believes that the claims asserted in the Merger Litigation
are without merit and intends to defend against the Merger
Litigation vigorously. However, in order to moot plaintiffs
unmeritorious disclosure claims, alleviate the costs, risks and
uncertainties inherent in litigation and provide additional
information to its stockholders, Bats has determined to
voluntarily supplement the Proxy Statement as described in this
Current Report on Form 8-K. Nothing in this Current Report on
Form 8-K shall be deemed an admission of the legal necessity or
materiality under applicable laws of any of the disclosures set
forth herein. To the contrary, Bats specifically denies all
allegations in the Merger Litigation that any additional
disclosure was or is required.
Supplemental Disclosures.
The following disclosures supplement the disclosures contained in
the Proxy Statement and should be read in conjunction with the
disclosures contained in the Proxy Statement, which should be
read in its entirety. To the extent that the information set
forth herein differs from or updates information contained in the
Proxy Statement, the information set forth herein shall supersede
or supplement the information in the Proxy Statement. All page
references are to pages in the Proxy Statement, and terms used
below, unless otherwise defined, have the meanings set forth in
the Proxy Statement.
The disclosure under the heading Selected Comparable Company
AnalysisBats is hereby supplemented by adding the following table
on page 146 of the Proxy Statement immediately before the
existing table on page 146 of the Proxy Statement:
|
Selected Comparable Companies (Bats) |
2016E P/E Ratio | 2017E P/E Ratio |
| Intercontinental Exchange Inc. | 20.4x | 18.0x |
| Nasdaq, Inc. | 19.0x | 16.6x |
| London Stock Exchange Group plc | 23.9x | 20.3x |
| Deutsche Brse AG | 16.8x | 15.1x |
The disclosure under the heading Selected Comparable Company
AnalysisCBOE Holdings is hereby supplemented by adding the
following table on page 147 of the Proxy Statement immediately
before the second existing table on page 147 of the Proxy
Statement:
|
Selected Comparable Companies (CBOE Holdings) |
2016E P/E Ratio | 2017E P/E Ratio |
| CME Group Inc. | 24.6x | 22.8x |
| MarketAxess Holdings Inc. | 53.7x | 44.3x |
| Intercontinental Exchange Inc. | 20.4x | 18.0x |
| Nasdaq, Inc. | 19.0x | 16.6x |
| London Stock Exchange Group plc | 23.9x | 20.3x |
| Deutsche Brse AG | 16.8x | 15.1x |
The disclosure under the heading Selected Precedent
Transaction Analysis is hereby supplemented by amending and
restating the first table on page 149 of the Proxy Statement to
read as follows:
| Date | Acquiror | Target | Price / NTM Earnings Multiple |
| 12/20/12 | Intercontinental Exchange | NYSE Euronext | 14.8x |
| 07/09/12 | Thomson Reuters | FX Alliance | 22.5x |
| 04/01/11 | Nasdaq OMX-ICE | NYSE Euronext | 16.3x |
| 10/25/10 | Singapore Exchange Ltd. | ASX Ltd. | 22.9x |
| 04/30/10 | Intercontinental Exchange | Climate Exchange | 62.8x |
| 03/17/08 | CME Group Inc. | NYMEX Holdings, Inc. | 27.1x |
| 12/10/07 | TSX Group Inc. | Montreal Exchange Inc. | 33.3x |
| 08/17/07 | Borse Dubai | OMX | 31.7x |
| 05/25/07 | Nasdaq Stock Market Inc. | OMX AB | 24.4x |
| 04/30/07 | Eurex | International Securities Exchange | 37.7x |
| 10/17/06 | CME | CBOT | 56.8x |
| 03/27/06 | Australian Stock Exchange | Sydney Futures Exchange | 23.0x |
| 04/20/05 | NYSE | Archipelago | 20.4x |
The disclosure under the heading Accretion/Dilution Analysis
on page 152 of the Proxy Statement is hereby supplemented by
amending and restating the paragraph to read as follows:
Accretion / Dilution Analysis
Barclays reviewed and analyzed the pro forma impact of the merger
on CBOE Holdings projected adjusted EPS for each of calendar
years 2017, 2018 and 2019 using (i) the Bats scenario two
financial projections, as extrapolated, (ii) the adjusted CBOE
Holdings financial projections, as extrapolated, and (iii) the
estimated synergies (assuming the year three estimated GAAP
synergies of $50.0 million would be realized beginning in
calendar year 2017). With respect to the pro forma adjusted EPS
of CBOE Holdings (excluding the amortization of acquisition
related intangibles), Barclays noted that pro forma adjusted EPS
would be 33.0%, 34.0% and 31.0% accretive to CBOE Holdings
standalone adjusted EPS for each of calendar years 2017, 2018 and
2019, respectively. An alternative analysis was also performed
assuming that the actual GAAP synergies would be $15.0 million in
2017, $35.0 million in 2018 and $50.0 million in 2019, per Bats
and CBOE Holdings management. Barclays noted that in this
alternative analysis the pro forma adjusted EPS would be 25.8%,
31.2% and 31.0% accretive to CBOE Holdings standalone adjusted
EPS for each of the 2017, 2018 and 2019 calendar years,
respectively.
The disclosure under the heading Bats Scenario One Financial
Projections is hereby supplemented and revised by amending and
restating the first table and related disclosure on page 417 of
the Proxy Statement to (i) replace the line item for EBIT with a
line item for EBITA, (ii) replace the line item for Net Income
with a line item for Adjusted Net Income, (iii) add footnotes (4)
and (5) to the first table on page 417, as shown below, and (iv)
include a reconciliation to net income for certain line items
shown in the Bats Scenario One Financial
Projections. The first table and related disclosure on page
417 of the Proxy Statement is amended and restated to read as
follows:
|
Bats Scenario One Financial Projections(1) |
Fiscal Year Ending December31, |
|||||||||||||||||||||||
|
(unaudited) |
2016E(7) |
2017E |
2018E |
2019E |
2020E |
2021E |
||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Net Revenue(2) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| EBITDA(3) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| EBITA(4) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Adjusted Net Income(5) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Unlevered Free Cash Flow(6) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| (1) |
This table contains financial measures that are not calculated or presented in accordance with GAAP. Those financial measures are referred to as Non-GAAP. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Bats may not be comparable to similarly titled amounts used by other companies. |
| (2) | Net Revenue is defined as revenues less cost of revenues. |
| (3) |
EBITDA is defined as income before interest, income taxes, depreciation and amortization. |
| (4) |
EBITA is defined as income before interest, income taxes and amortization. |
| (5) |
Adjusted Net Income is defined as net income adjusted for amortization and interest, net of the income tax effects of these adjustments. |
| (6) |
Unlevered Free Cash Flow is defined as net income plus depreciation less tax benefit cost, capital expenditures and change in working capital. |
| (7) | Includes actual results through June30, 2016. |
Set forth in the table below is a reconciliation of Adjusted Net
Income, EBITDA, EBITA and Unlevered Free Cash Flow, as included
in the Bats Scenario One Financial Projections, to Net Income for
the periods indicated below:
| Fiscal Year Ending December31, | ||||||||||||||||||||||||
| 2016E | 2017E | 2018E | 2019E | 2020E | 2021E | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Net Income | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Amortization | ||||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||
| Income tax impact of adjustments | -26 | -18 | -14 | -15 | -13 | -13 | ||||||||||||||||||
| Adjusted Net Income | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net Income | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Amortization | ||||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||
| Income tax provision | ||||||||||||||||||||||||
| EBITA | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||
| EBITDA | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Adjusted Net Income | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||
| Income tax benefit cost | -70 | -50 | ||||||||||||||||||||||
| Capital expenditures (purchases of property and equipment) | -18 | -18 | -17 | -18 | -23 | -23 | ||||||||||||||||||
|
Change in working capital (changes in operating assets and liabilities) |
-5 | -5 | -5 | -5 | -5 | -5 | ||||||||||||||||||
| Unlevered Free Cash Flow | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The disclosure under the heading Bats Scenario Two Financial
Projections is hereby supplemented and revised by amending and
restating the first table and related disclosure on page 418 of
the Proxy Statement to (i) replace the line item for EBIT with a
line item for EBITA, (ii) replace the line item for Net Income
with a line item for Adjusted Net Income, (iii) add footnotes (4)
and (5) to the first table on page 418, as shown below, and (iv)
include a reconciliation to net income for certain line items
shown in the Bats Scenario Two Financial Projections. The first
table and related disclosure on page 418 of the Proxy Statement
is amended and restated to read as follows:
|
Bats Scenario Two Financial Projections(1) |
Fiscal Year Ending December31, | |||||||||||||||||||||||
| (unaudited) |
2016E(7) |
2017E | 2018E | 2019E | 2020E | 2021E | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Net Revenue(2) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| EBITDA(3) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| EBITA(4) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Adjusted Net Income(5) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Unlevered Free Cash Flow(6) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| (1) |
This table contains financial measures that are not calculated or presented in accordance with GAAP. Those financial measures are referred to as Non-GAAP. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Bats may not be comparable to similarly titled amounts used by other companies. |
| (2) | Net Revenue is defined as revenues less cost of revenues. |
| (3) |
EBITDA is defined as income before interest, income taxes, depreciation and amortization. |
| (4) |
EBITA is defined as income before interest, income taxes and amortization. |
| (5) |
Adjusted Net Income is defined as net income adjusted for amortization and interest, net of the income tax effects of these adjustments. |
| (6) |
Unlevered Free Cash Flow is defined as net income plus depreciation less tax benefit cost, capital expenditures and change in working capital. |
| (7) | Includes actual results through June30, 2016. |
Set forth in the table below is a reconciliation of Adjusted Net
Income, EBITDA, EBITA and Unlevered Free Cash Flow, as included
in the Bats Scenario Two Financial Projections, to Net Income for
the periods indicated below:
| Fiscal Year Ending December31, | ||||||||||||||||||||||||
| 2016E | 2017E | 2018E | 2019E | 2020E | 2021E | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Net Income | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Amortization | ||||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||
| Income tax impact of adjustments | -26 | -19 | -15 | -15 | -13 | -12 | ||||||||||||||||||
| Adjusted Net Income | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net Income | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Amortization | ||||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||
| Income tax provision | ||||||||||||||||||||||||
| EBITA | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||
| EBITDA | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Adjusted Net Income | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||
| Income tax benefit cost | -70 | -50 | ||||||||||||||||||||||
| Capital expenditures (purchases of property and equipment) | -17 | -17 | -17 | -19 | -23 | -23 | ||||||||||||||||||
|
Change in working capital (changes in operating assets and liabilities) |
-5 | -5 | -5 | -5 | -5 | -5 | ||||||||||||||||||
| Unlevered Free Cash Flow | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Cautionary Statements Regarding Forward-Looking
Information
This Current Report contains certain statements regarding
intentions, beliefs and expectations or predictions for the
future of CBOE Holdings and Bats, which are forward-looking
statements as that term is defined in the Private Securities
Litigation Reform Act of 1995, including statements regarding
post-closing integration or optimization of the combined
businesses, anticipated synergies and the expected benefits of
the proposed transaction. Words such as believes, expects,
anticipates, estimates, intends, plans, seeks, projects or words
of similar meaning, or future or conditional verbs, such as will,
should, would, could, may or variations of such words and similar
expressions are intended to identify such forward-looking
statements, which are not statements of historical fact or
guarantees or assurances of future performance. However, the
absence of these words or similar expressions does not mean that
a statement is not forward-looking.
Actual results could differ materially from those projected or
forecast in the forward-looking statements. The factors that
could cause actual results to differ materially include, without
limitation, the following risks, uncertainties or assumptions:
the satisfaction of the conditions precedent to the consummation
of the proposed transaction, including, without limitation, the
receipt of stockholder and regulatory approvals (including
clearance by antitrust authorities necessary to complete the
transaction) on the terms desired or anticipated; unanticipated
difficulties or expenditures relating to the proposed
transaction, including, without limitation, difficulties that
result in the failure to realize expected synergies, efficiencies
and cost savings from the proposed transaction within the
expected time period (if at all), whether in connection with
integration, combining trading platforms, broadening distribution
of offerings or otherwise; CBOE Holdings ability to obtain and
maintain an investment grade credit rating and obtain financing
on the anticipated terms and schedule; risks relating to the
value of CBOE Holdings shares to be issued in the transaction;
disruptions of CBOE Holdings and Bats current plans, operations
and relationships with market participants caused by the
announcement and pendency of the proposed transaction; potential
difficulties in CBOE Holdings and Bats ability to retain
employees as a result of the announcement and pendency of the
proposed transaction; legal proceedings that may be instituted
against CBOE Holdings and Bats following announcement of the
proposed transaction; and other factors described in CBOE
Holdings annual report on Form 10-K for the fiscal year ended
December 31, 2015, which was filed with the Securities and
Exchange Commission (the SEC) on February 19,
2016, Bats final prospectus in connection with its initial public
offering, which was filed with the SEC to Rule 424(b) on April
15, 2016, Bats quarterly report for the quarterly period ended
September 30, 2016, which was filed with the SEC on November 8,
2016, and other filings made by CBOE Holdings and Bats from time
to time with the SEC. The factors described in such SEC filings
include, without limitation: CBOE Holdings ability to retain its
right to exclusively list and trade certain index options and
futures products; economic, political and market conditions;
compliance with legal and regulatory obligations (and changes
thereto), including obligations under agreements with regulatory
agencies; increasing competition in the industries in which CBOE
Holdings and Bats operate; CBOE Holdings and Bats ability to
operate their respective businesses without violating the
intellectual property rights of others and the costs associated
with protecting their respective intellectual property rights;
decreases in trading volumes or a shift in the mix of products
traded on CBOE Holdings or Bats exchanges; each of CBOE Holdings
and Bats ability to accommodate trading volume and transaction
traffic, including significant increases, without failure or
degradation of performance of their respective systems; CBOE
Holdings and Bats ability to protect their respective systems and
communication networks from security risks, including
cyber-attacks; the ability to manage CBOE Holdings and Bats
growth and strategic acquisitions or alliances effectively,
including the ability to realize the anticipated benefits of past
acquisitions; the ability to adapt successfully to technological
changes to meet customers needs and developments in the
marketplace; and the impact of legal and regulatory changes and
proceedings, whether or not related to the proposed transaction.
Neither CBOE Holdings nor Bats undertakes, and each of them
expressly disclaims, any duty to update any forward-looking
statement whether as a result of new information, future events
or otherwise, except as required
by law. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
hereof.
Additional Information Regarding the Transaction and
Where to Find It
This Current Report does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation
of any vote or approval. This Current Report is being made in
respect of the proposed merger transaction involving CBOE
Holdings and Bats. The issuance of shares of CBOE Holdings common
stock in connection with the proposed merger will be submitted to
the stockholders of CBOE Holdings for their consideration, and
the proposed merger will be submitted to the stockholders of Bats
for their consideration. In connection therewith, the parties
have filed relevant materials with the SEC, including a
definitive joint proxy statement/prospectus, which has been
mailed to CBOE Holdings stockholders and Bats stockholders.
BEFORE MAKING ANY VOTING OR ANY INVESTMENT DECISION, INVESTORS
AND SECURITY HOLDERS OF CBOE HOLDINGS AND/OR BATS ARE URGED TO
READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS REGARDING
THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS FILED
OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. Investors and security holders may obtain
free copies of the definitive joint proxy statement/prospectus,
any amendments or supplements thereto and other documents
containing important information about each of Bats and CBOE
Holdings through the website maintained by the SEC at
www.sec.gov. Copies of the documents filed with the SEC by CBOE
Holdings will be available free of charge on CBOE Holdings
website at
http://ir.cboe.com/financial-information/sec-filings.aspx under
the heading SEC Filings or by contacting CBOE Holdings Investor
Relations Department at (312) 786-7136. Copies of the documents
filed with the SEC by Bats will be available free of charge on
Bats website at
http://www.bats.com/investor_relations/financials/ under the
heading SEC Filings or by contacting Bats Investor Relations
Department at (913) 815-7132.
Participants in the Solicitation
CBOE Holdings, Bats, their respective directors and executive
officers, certain other members of CBOE Holdings and Bats
respective management and certain of CBOE Holdings and Bats
respective employees may be deemed to be participants in the
solicitation of proxies in connection with the proposed
transaction. Information about the directors and executive
officers of CBOE Holdings is set forth in its proxy statement for
its 2016 annual meeting of stockholders, which was filed with the
SEC on April 6, 2016, and its annual report on Form 10-K for the
fiscal year ended December 31, 2015, which was filed with the SEC
on February 19, 2016, and information about the directors and
executive officers of Bats is set forth in its final prospectus
in connection with its initial public offering, which was filed
with the SEC on April 15, 2016. Each of these documents can be
obtained free of charge from the sources indicated above. Other
information regarding the participants in the proxy solicitation
and a description of their direct and indirect interests, by
security holdings or otherwise, are contained in the definitive
joint proxy statement/prospectus and other relevant materials
filed with the SEC.
About Bats Global Markets, Inc. (BATS:BATS)
Bats Global Markets, Inc., formerly BATS Global Markets, Inc., is a global financial technology company. The Company provides trade execution, market data, trade reporting, connectivity and risk management solutions to brokers, market makers and asset managers. Its segments include U.S. Equities, European Equities, U.S. Options and Global FX. The U.S. Equities segment includes listed cash equities and exchange-traded products (ETPs) transaction services that occur on Bats BZX Exchange, Inc. (BZX), Bats BYX Exchange, Inc. (BYX), Bats EDGX Exchange, Inc. (EDGX) and Bats EDGA Exchange, Inc. (EDGA). The European Equities segment includes the pan-European listed cash equities transaction services, ETPs, exchange-traded commodities, and international depository receipts. The U.S. Options segment includes the listed equity options transaction services that occur on BZX and EDGX. The Global FX segment includes institutional spot FX services that occur on the Hotspot Platform. Bats Global Markets, Inc. (BATS:BATS) Recent Trading Information
Bats Global Markets, Inc. (BATS:BATS) closed its last trading session up +0.11 at 33.93 with 35,244 shares trading hands.
