Cboe Global Markets to Acquire Struggling Canadian Securities Exchange NEO

Posted on 11/16/2021

Cboe Global Markets, Inc. (Cboe: CBOE), a provider of global market infrastructure and tradable products,entered into a definitive agreement to acquire Aequitas Innovations, Inc., more commonly known as NEO, a fintech organization that comprises of a fully registered Tier-1 Canadian securities exchange with a diverse product and services set ranging from corporate listings to cash equity trading. Ownership of NEO will help allow Cboe to provide a more fulsome Canadian equities offering, operating the NEO Exchange, a national securities exchange with trading, listings and other services, in addition to MATCHNow, the alternative trading system (ATS) acquired by Cboe in 2020. This strengthened offering is expected to drive more trading activity on Cboe markets and improve efficiencies and opportunities for investors and capital-raisers in both Canada and the U.S. Fully operational since 2015, the NEO Exchange is a Toronto-based Canadian stock exchange operator with business lines across listings, trading, and market data. Its sister company, NEO Connect, provides a distribution platform supporting mutual funds, private funds and private corporates. With ownership of the MATCHNow and NEO businesses, Cboe will be able to provide a comprehensive equities platform for the Canadian markets with over 16.5% combined market share expected at close2, market data feeds, access services, listings and distribution services for non-listed securities.

Aequitas Innovations is backed by a number of companies that include, ITG Canada Inc., Mackenzie Investments, OMERS OCM Investments II Inc (Ontario Municipal Employees Retirement System), Barclays, Royal Bank of Canada (RBC Dominion Securities Inc.), BCE, British Columbia Investment Management Corporation (BCI), CI Investments Inc. (CI Financial Corporation), Davis Rea Ltd, IGM Financial Inc., Invesco Canada (Invesco Ltd.), ITG Canada, Leede Jones Gable, Maison Placements Canada, PSP Public Markets (PSP Investments) and Vernon & Park Capital.

NEO Exchange received a recognition order from the Ontario Securities Commission on November 17, 2014. NEO operates the NEO Exchange, focused on fairness, liquidity, transparency and efficiency that brings together investors and capital-raisers, serving as a central force driving the Canadian capital markets forward. As the second most active stock exchange in Canada, the NEO Exchange provides three market models: NEO-L, a make-take model, NEO-N, an inverted model, and NEO-D, a darkpool. It also offers a corporate, exchange traded product (ETP) and Canadian Depository Receipt (CDR) listings business and real-time market data services. NEO operates a distribution platform for unlisted securities, NEO Connect, and an automated workflow supporting private placements via DealSquare, a NEO Connect partner.

The transaction, which Cboe plans to fund with cash on hand, supplemented by increased debt, if needed, is expected to close in the first half of 2022, subject to regulatory review and other customary closing conditions. Terms of the deal were not disclosed, however, the company noted that the purchase price is not material from a financial perspective and expects it to be nominally accretive.

NEO Exchange was incorporated under the Canada Business Corporations Act on January 17, 2014 and is a wholly-owned subsidiary of Aequitas Innovations Inc. Aequitas was incorporated under the CBCA on May 30, 2013 and is a holding company with no operational responsibilities.

In April 2019, NEO Exchange scored its first billion dollar listing with U.S. cannabis company Columbia Care. By July 2019, the NEO Exchange became the 3rd most active marketplace in Canada in volume traded, surpassing the Canadian Securities Exchange and near Nasdaq Canada.

Legal advisors to Cboe Global Markets on the transaction are Blake, Cassels & Graydon LLP, with TD Securities, Inc. serving as financial advisor.

Keywords: Aequitas NEO Exchange Inc.

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