Toronto Stock Exchange Parent Buys NGX for C$38M
TSX Group Inc., the parent company of the Toronto Stock Exchange and TSX Venture Exchange, Canada's two national exchanges serving the senior equity and public venture equity markets, said Tuesday that it will purchase 100% of NGX Canada Inc., which operates a large natural gas and electricity trading and clearing exchange, for C$38 million. The transaction is expected to close in the first quarter and is subject to regulatory approvals.
"This transaction advances our strategy to extend and diversify TSX's pre-eminent position in Canada while looking for opportunities to grow in the United States," said Barbara Stymiest, TSX Group's CEO. "The addition of NGX significantly extends our product and service offering, while at the same time expanding our reach outside of Canada."
Peter Krenkel, CEO of NGX, said, "TSX's market position and expertise will strongly support the expansion and development of our business."
OMHEX, which owned NGX, said the divestiture will sharpen the company's focus on the financial markets.
Based in Calgary, NGX enables energy traders to trade and clear natural gas spot, forward and swap contracts and electricity swap contracts. Since its founding in 1993 by WestCoast Energy and its acquisition in 2000 and 2001 by OMHEX, NGX has developed into a large energy commodity exchange with a solid customer base.
Based on preliminary results for the year ended Dec. 31, 2003, NGX had revenues of $13.9 million and net income of $3.4 million, the company said. Its asset value totaled $415.3 million and its net book value totaled of $13.4 million, including cash of $12.6 million, at the end of 2003.
As part of its clearing operations, NGX becomes the counterparty in each transaction thereby guaranteeing the fulfillment of every contract that is executed on its electronic trading platform. To manage the risk associated with this activity NGX is fully collateralized and maintains a $30 million clearing backstop fund. As part of the transaction, TSX Group will become the guarantor of this fund in place of OMHEX.
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