Nine banks have agreed to pay $180 million for a minority stake in Thomson Corp's TradeWeb bond trading platform, and will invest an additional $100 million in a bid to expand the service they sold in 2004.
The banks are Merrill Lynch, Goldman Sachs, JPMorgan Chase, Credit Suisse, Lehman Brothers, Morgan Stanley, Deutsche Bank, Royal Bank of Scotland and UBS, Toronto-based publisher Thomson said on Thursday.
Seven of the nine were the previous owners of TradeWeb who sold the business to Thomson in April 2004. Citigroup was part of the previous ownership group. UBS and RBS were not.
The market has changed dramatically in the last three to four years, said Chris Willcox, co-head of JPMorgan's global rates and FX business.
Electronic trading has become a much more important part of the market, he added. Our clients have become much more accustomed to using it and in some cases demand to be serviced through those channels.
TradeWeb, which Thomson bought in 2004 for $385 million cash and up to $150 million in payments based on performance, is a marketplace for dealers in fixed income and derivatives as well as some equities-market products, with about 2,200 buy side customers.
TradeWeb clients executed more than $51.2 trillion in trades last year, nearly double the level of 2004. It said average daily trading volume exceeded $250 billion.
The size of the minority stake the banks are buying was not disclosed. The Wall Street Journal reported that the deal would value TradeWeb at about $1.5 billion.
Thomson said all the banks had committed to participate in TradeWeb's markets, including in interest rate swaps. Thomson and the banks will also fund additional investment in expanding TradeWeb in various asset classes.
TradeWeb President Lee Olesky said the banks would put in an additional $100 million to fund asset class expansion, including investment in interest rate swaps, beyond the $180 million paid for the ownership stake.
Thomson also will invest some cash, he added.
We've had tremendous success in the last three-and-a-half years since the banks sold us, he said. We have entered new asset classes and gone into Asia. Now it will be even better.
JPMorgan's Willcox said the recent global credit crunch had not been the catalyst for the deal, but that the crisis did highlight difficulties on single-dealer platforms and showed TradeWeb's multi-dealer platform in a good light.
There have probably only been a small handful of banks who have been able to continue to provide world-class liquidity to their clients during that time, he said.
It was very clear that some dealers were not able to guarantee the provision of liquidity through August and part of September, Willcox added. There were only two, possibly three, banks who were able to maintain their liquidity through single and multi-dealer platforms.
Thomson is seeking approval from European regulators to buy news and information provider Reuters Group in a deal announced in May.