Unwinding of ICE-Trayport merger in spotlight as data-deal ruling nears

8 June 2017. By Simon Zekaria.

With Intercontinental Exchange and Trayport awaiting a delayed ruling from UK regulators on a data-sharing deal between them, the spotlight falls on the imminent forced unwinding of the companies' merger.

The Competition and Markets Authority expects its final ruling on the data-sharing agreement later this month, after postponing it from late May.

In 2015 ICE, a US-based international network of exchanges and clearinghouses, bought Trayport, whose software underpins more than 85 percent of the European energy-trading market, for $650 million.

The CMA ruled against the buyout last year, saying it could push traders away from rival exchanges and restrict competition. ICE challenged the decision, but the Competition Appeal Tribunal upheld it.

The UK authority also told ICE to sever a data-sharing contract — penned while its competition inquiry was ongoing — that would put ICE data on Trayport trading screens and provide its customers with a link to ICE's clearinghouse.

The CAT did ask the CMA to reconsider that decision, but the authority stuck to its guns and in April provisionally found that the deal should be ended, saying it could make it harder to sell Trayport and could benefit ICE in the future while disadvantaging a new owner.

The companies argue the agreement neither confers an advantage on ICE, nor restricts Trayport's ability to operate its business.

Until the CMA makes its final ruling on that data-sharing deal, meanwhile, ICE's forced sale of Trayport remains suspended.

Sale process

The delay in starting the sale process — which will be automatic once the CMA makes its ruling — is a disruption for ICE, even if it hasn't complained to the CMA about the matter.

While ICE is free to sound out potential buyers for Trayport, its hands are formally tied.

The CMA has regulatory oversight of Trayport's sale and final approval of the buyer. It can also appoint a monitoring trustee.

Once the process to divest Trayport starts, there is a deadline for ICE to complete the deal. This period is agreed confidentially between the parties, but is normally a few months, MLex has learned.

The CMA will base its final approval of any buyer for Trayport based on a broad set of criteria focused on suitability and industry expertise.

The regulator checks whether a prospective buyer is independent of the merger parties, that it has the capability and commitment to compete in the relevant markets, and that the sale won't create further competition concerns.

If a suitable buyer isn't found or the deadline is missed, an independent trustee will be appointed to take over the sale. The merger parties are still responsible for securing a prospective buyer.

The trustee might have to complete the transaction within a specified period at the best available price in the circumstances, subject to the CMA's prior approval of the buyer and the sale arrangements.

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