UPDATE 4-Chi-X Europe says gets takeover approach

* BATS approached Chi-X about potential deal–report

* Approach follows LSE’s purchase of Turquoise platform
(Adds report about BATS)

By Douwe Miedema and Alex Chambers

LONDON, Aug 24 (BestGrowthStock) – Trading platform Chi-X Europe
put itself on the auction block by revealing an approach from a
suitor, placing rivals such as Nasdaq OMX and BATS in the
spotlight as the sector consolidates.

BATS has approached Chi-X Europe about a takeover,
Bloomberg reported, citing unnamed sources. BATS declined to

Chi-X — the most successful of the low-cost multilateral
trading facilities (MTFs) that sprang up after European Union
deregulation opened national exchanges to competition in 2007
— said it could sell all or part of its business.

“Chi-X … can confirm that it has received an enquiry from
a third party, which may or may not lead to an offer for the
whole or partial sale of the company,” it said in a statement.

“We were not seeking a transaction and the option of
remaining independent would allow us to build further value for
shareholders,” Chi-X Europe said.

It gave no further details.

The approach comes eight months after the London Stock
Exchange (LSE) (LSE.L: ) swallowed up another upstart MTF,
Turquoise. [ID:nLDE5BK073]

“This is a totally different beast to Turquoise — this is
the big beast in the MTF field,” said Herbie Skeete, managing
director of research firm Mondo Visione.

Nasdaq OMX Group Inc (NDAQ.O: ) is also seen by many industry
analysts as a potential buyer of Chi-X. The U.S.-based
technology exchange has suffered a series of setbacks in its
international expansion. [ID:nLDE5BL01C]

Nasdaq declined comment on any interest in Chi-X Europe, a
private company owned by a group of financial institutions that
have not disclosed its value.

But a source familiar with the matter said that, while
Nasdaq had not approached Chi-X, it might get involved in the
coming days as a more formal process was launched and bankers
would seek to contact further possible bidders.

Other suitors could include Asian outfit Financial
Technologies (FITE.BO: ), Singapore state investor Temasek
Holdings [TEM.UL] and even billionaire financier George Soros,
industry observers said.

Chi-X’s share of European cash equities trading is more
than four times bigger than that of Turquiose. LSE sold
separate 3 percent stakes in Turquoise in a deal in March that
valued the unit at 33 million pounds ($50.9 million).

“Chi-X is probably close to breaking even and its volumes
are healthy. In the hands of a big exchange it could give the
LSE an even bigger run for its money,” said Skeete.

Chi-X, which generated 2009 trading revenue of 24 million
pounds, said it had become profitable this year.

In the past month, Chi-X overtook NYSE Euronext (NYX.N: ) as
the second-biggest European trading platform behind the LSE in
all-exchange activity.

According to Thomson Reuters data Chi-X has 15.6 percent of
the cash equities trading market compared with NYSE’s 15
percent. Turquoise has a 3.4 percent share.

The LSE — which has 24.2 percent of European share trading
— refused to comment, as did German exchange operator Deutsche
Boerse AG (DB1Gn.DE: ), which has 11.8 percent of the market.

But the two incumbents are not bidding for Chi-X, according
to two sources, who were each individually familiar with one of
the respective bourses’ thinking.

Many new entrants have had a hard time becoming profitable,
even having gained market share and forcing incumbents such as
the LSE and Deutsche Boerse to adapt and cut prices, leading
analysts to forecast market consolidation.

Speaking at a Reuters Exchanges and Trading Summit in
March, Chi-X Europe Chief Executive Alasdair Haynes forecast
there will ultimately be four or five pan-European market
centres dominating share trading within five years.

The owners of Chi-X Europe include BNP Paribas (BNPP.PA: ),
Citadel, Citigroup (C.N: ), Credit Suisse (CSGN.VX: ), Fortis,
GETCO Europe, Goldman Sachs (GS.N: ), Instinet Holdings (8604.T: ),
Merrill Lynch (BAC.N: ), Morgan Stanley (MS.N: ) (Read more about the money market today. ), Optiver, Societe
Generale (SOGN.PA: ) and UBS (UBSN.VX: ).

For a Breakingviews column on Chi-X see [ID:nLDE67N0LC]
($1=.6484 Pound)
(Reporting by Douwe Miedema and Alex Chambers; additional
reporting by Paritosh Bansal and Jonathan Spicer in New York;
editing by David Holmes, Michael Shields and Andre Grenon)

UPDATE 4-Chi-X Europe says gets takeover approach