The Nasdaq Stock Market Inc and a consortium of investors on Friday agreed to purchase Instinet Group Inc for $1.88 billion cash in a move that will intensify the already heated rivalry between the New York Stock Exchange and Nasdaq. The deal underscores the rapidly evolving securities trading industry, and how fierce competition - combined with recent changes to securities laws - have become the impetus for consolidation among industry participants.
While Nasdaq's deal was widely anticipated by market participants, market watchers were taken by surprise on Wednesday by a blockbuster deal merging the New York Stock Exchange and electronic trading company Archipelago Holdings.
The rivalry between the NYSE and the Nasdaq in their new incarnations is expected to intensify, analysts say.
Reuters Group Plc, Instinet's majority owner, is selling its entire stake. Instinet's electronic trading network will go to Nasdaq, while the institutional brokerage unit - which will be headed by Edward Nicoll, Instinet's CEO - will go to Silver Lake Partners. Bank of New York will buy Instinet's soft-dollar broker business of Lynch, Jones and Ryan.
Under terms of the deal, Nasdaq will pay $934.5 million and private equity firm Silver Lake Partners will pay $207.5 million. Bank of New York will pay $174 million, while the balance will come from Instinet's available cash.