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Acquisitions and Divestitures
12 Months Ended
Dec. 31, 2018
Business Combinations [Abstract]  
Acquisitions and Divestitures
Acquisitions and Divestitures
Divestiture of Trayport and the Acquisitions of Natural Gas Exchange Inc. and Shorcan Energy Brokers Inc.
In December 2015, we acquired 100% of Trayport for $620 million, in a stock transaction comprised of 12.6 million shares of our common stock. Trayport is a software company that licenses its technology to serve exchanges, OTC brokers and traders to facilitate electronic and hybrid trade execution primarily in the energy markets.
The U.K. Competition and Markets Authority, or the CMA, undertook a review of our 2015 acquisition of Trayport under the merger control laws of the U.K. In 2016, the CMA issued its findings calling for a divestment of Trayport to remedy what it determined to be a substantial lessening of competition. In 2016, we appealed the decision with the Competition Appeal Tribunal. In March 2017, the Competition Appeal Tribunal upheld the CMA decision. Thereafter, we asked for leave to appeal the decision at the U.K. Court of Appeals that denied our request and as such, we were obligated to sell Trayport by January 2018.
We sold Trayport to TMX Group in December 2017 for £550 million ($733 million). The gross proceeds included a combination of £350 million ($466 million) in cash and £200 million ($267 million) in value relating to our acquisitions of Natural Gas Exchange, Inc., or NGX, now named ICE NGX, and Shorcan Energy Brokers Inc., or Shorcan Energy, from TMX Group. Shorcan Energy is now named CalRock Brokers, Inc., or CalRock. We recognized a net gain of $110 million in other income. The net gain was equal to the $733 million in gross proceeds received less the adjusted carrying value of Trayport’s net assets of $607 million ($531 million carrying value plus $76 million in accumulated other comprehensive loss from foreign currency translation) less $16 million in disposition costs.
Trayport was included in our Data and Listings segment and ICE NGX and CalRock are primarily included in our Trading and Clearing segment.
The functional currency of Trayport was the pound sterling. The $620 million in Trayport net assets were recorded when acquired at a pound sterling/U.S. dollar exchange rate of 1.5218 (£407 million). Because our financial statements are presented in U.S. dollars, we included Trayport net assets in our financial statements based on U.S. dollars using the exchange rates in effect at the end of each reporting period. Therefore, exchange rates affected the value of the Trayport balance sheet, with gains or losses included in the cumulative translation adjustment account. As a result of the decrease in the pound sterling/U.S. dollar exchange rate to 1.3331 as of its disposition date, the portion of our equity attributable to its net assets in accumulated other comprehensive loss from foreign currency translation was $76 million. In connection with the divestiture, the $76 million loss was included in the net gain on the divestiture as discussed above.
As of June 30, 2017, we classified Trayport as held for sale and accordingly ceased recording depreciation and amortization for its property and equipment and other intangible assets.
ICE NGX, headquartered in Calgary, provides electronic execution, central counterparty clearing and data services to the physical North American natural gas, electricity and oil markets. CalRock offers brokerage services for the North American crude oil markets.
The ICE NGX and CalRock purchase price was allocated to their net tangible and identifiable intangible assets and liabilities based on their estimated fair values on the acquisition date. Our allocation to identifiable intangible assets was $198 million, including $140 million for exchange registrations and licenses, which have been assigned an indefinite useful life, and $53 million for customer relationship intangible assets, which have been assigned useful lives of 20 years. The excess of the purchase price over the allocated net tangible and identifiable intangible asset value was $123 million and was recorded as goodwill.
Acquisitions
On January 2, 2018, we acquired BondPoint from Virtu Financial, Inc. for $400 million in cash. BondPoint is a provider of electronic fixed income trading solutions for the buy-side and sell-side, offering access to centralized liquidity and automated trade execution services through its alternative trading system, or ATS. BondPoint is primarily included in our Trading and Clearing segment. The BondPoint purchase price was allocated to its net tangible and identifiable intangible assets and liabilities based on their estimated fair values as of January 2, 2018. Our allocation to identifiable intangible assets was $130 million and included (i) $123 million of customer relationships, which have been assigned a useful life of 15 years, and (ii) $7 million of developed technology, which has been assigned a useful life of three years. The excess of the purchase price over the allocated net tangible and identifiable intangible asset value was $267 million and was recorded as goodwill.
On July 18, 2018, we acquired CHX Holdings, Inc., the parent company of the Chicago Stock Exchange, or CHX, a full-service stock exchange including trading, data and corporate listings services. CHX operates as a registered national securities exchange, and is primarily included in our Trading and Clearing segment.
On July 23, 2018, we acquired TMC Bonds, LLC, or TMC Bonds, for $700 million in cash. The cash consideration is gross of $15 million cash held by TMC Bonds on the date of acquisition. TMC Bonds is an electronic fixed income marketplace, supporting anonymous trading across multiple protocols in various asset classes, including municipals, corporates, treasuries, agencies and certificates of deposit. TMC Bonds is primarily included in our Trading and Clearing segment. The purchase price of TMC Bonds was allocated to the preliminary net tangible and identifiable intangible assets and liabilities based on their estimated fair values as of July 23, 2018. The identifiable intangible assets acquired were $261 million and primarily included (i) customer relationships of $253 million, which have been assigned a useful life of 15 years, and (ii) developed technology of $7 million, which has been assigned a useful life of three years. The excess of the purchase price over the preliminary net tangible and identifiable intangible assets was $423 million and was recorded as goodwill.
We now own 100% of MERS. MERS was previously a privately held, member-based organization that owned and managed the MERS® System, made up of lenders, servicers, sub-servicers, investors and government institutions. Originally, on June 30, 2016, we acquired a majority equity position in MERS and entered into a software development agreement to rebuild the MERS® System, a national electronic registry that tracks the changes in servicing rights and beneficial ownership interests in U.S.-based mortgage loans. We treated the investment as an equity method investment since we did not have the ability to control the operations of MERS. On July 20, 2018, we exercised our option to purchase all of the remaining equity interests of MERS as a result of satisfying our deliverables under the software development agreement. On October 3, 2018, we completed the purchase of all remaining interests and accordingly, own 100% of MERS. On that date, we gained control of MERS, began to include MERS's results as part of our consolidated operations, and recorded a $110 million gain on our initial investment value as other non-operating income. MERS is now part of ICE Mortgage Services and is included in our Trading and Clearing segment.
On October 20, 2017, we acquired Bank of America Merrill Lynch, or BofAML’s, Global Research division’s index business. The BofAML indices are the second largest group of fixed income indices as measured by assets under management, or AUM, globally, and the indices have been re-branded as the ICE BofAML indices. The ICE BofAML indices are included in our Data and Listings segment.
On May 1, 2017, we acquired 100% of TMX Atrium, a global extranet and wireless services business, from TMX Group. TMX Atrium provides low-latency access to markets and market data across 12 countries, more than 30 major trading venues, and ultra-low latency wireless connectivity to access markets and market data in the Toronto, New Jersey and Chicago metro areas. The wireless assets consist of microwave and millimeter networks that transport market data and provide private bandwidth. TMX Atrium is included in our Data and Listings segment.
On January 31, 2017, we acquired 100% of National Stock Exchange, Inc., now named NYSE National. The acquisition gave the NYSE Group a new U.S. exchange license. NYSE National is distinct from NYSE Group’s other listings exchanges because NYSE National is only a trading venue and not a listings market. NYSE Group’s other listings exchanges, NYSE, NYSE American, NYSE Arca and newly-acquired CHX, have unique market models designed for corporate and ETF issuers. After closing the transaction, NYSE National ceased operations on February 1, 2017. NYSE Group re-launched operations and commenced trading in May 2018. NYSE National is included in our Trading and Clearing segment.
On October 3, 2016, we acquired from S&P Global 100% of Standard & Poor’s Securities Evaluations, Inc., or SPSE, and 100% of Credit Market Analysis for $431 million in cash. The cash consideration was funded from borrowings under our commercial paper program. SPSE, which has been renamed Securities Evaluations, is a provider of fixed income evaluated pricing and Credit Market Analysis is a provider of independent data for the OTC markets, including credit derivatives and bonds. The purchase price was allocated to the net tangible and identifiable intangible assets and liabilities based on their estimated fair values as of October 3, 2016. The identifiable intangible assets acquired were $171 million, including customer relationship intangible assets for $135 million, which have been assigned useful lives of 15 to 20 years, and data/databases intangible assets for $29 million, which have been assigned useful lives of 5 to 10 years. The excess of the purchase price over the net tangible and identifiable intangible assets was $312 million and was recorded as goodwill. Securities Evaluations is included in our Data and Listings segment.
Non-Controlling Interest
As of December 31, 2016, non-controlling interests included those related to the operating results of our CDS clearing subsidiaries in which non-ICE limited partners held a 42.5% net profit sharing interest; ICE Endex in which Gasunie held a 21% ownership interest; and ICE Clear Netherlands in which ABN AMRO Clearing Bank N.V. held a 25% ownership interest. For both ICE Endex and ICE Clear Netherlands, in addition to the non-controlling interest reported in the consolidated statements of income, we reported redeemable non-controlling interest in the consolidated balance sheets which represents the minority interest redemption fair value for each company.
During 2017 we purchased both Gasunie’s 21% minority ownership interest in ICE Endex and ABN AMRO Clearing Bank N.V.’s 25% minority ownership interest in ICE Clear Netherlands. Subsequent to these acquisitions, we own 100% of ICE Endex and ICE Clear Netherlands and no longer include non-controlling interest for ICE Endex and ICE Clear Netherlands in our consolidated financial statements.
During 2017, we purchased 12.6% of the net profit sharing interest in our CDS clearing subsidiaries and in September 2018, we purchased an additional 3.2% interest. The remaining non-ICE limited partners in our CDS clearing subsidiaries hold a 26.7% ownership interest as of December 31, 2018.
In December 2018, Bakkt, LLC, or Bakkt, a newly formed entity, was capitalized with $183 million in initial funding by us as majority owner, along with a group of other minority investors. Bakkt is an integrated platform that will enable consumers and institutions to transact in digital assets. Bakkt will include regulated trading, clearing and custodial solutions for digital assets, which will be supported by ICE Futures U.S. and ICE Clear U.S. We hold a call option over these interests subject to certain terms, similarly the non-ICE partners in Bakkt hold a put option to require us to repurchase their interests subject to certain terms. These minority interests are reflected as redeemable non-controlling interests in temporary equity within our consolidated balance sheet.
Divestitures
On June 1, 2017, we sold NYSE Governance Services, a provider of governance, compliance, and education tools for organizations and their boards of directors, to Marlin Heritage, L.P. We recognized a net loss of $6 million on the divestiture of NYSE Governance Services, which was recorded as an impairment loss within our Data and Listings segment in the accompanying consolidated statements of income in 2017.
On March 31, 2017, we sold Interactive Data Managed Solutions, or IDMS, a unit of Interactive Data, to FactSet. IDMS is a managed solutions and portal provider for the global wealth management industry. There was no gain or loss recognized on the sale of IDMS.