KUALA LUMPUR (Sept 18): Bursa Malaysia Bhd is acquiring the remaining 25% equity in Bursa Malaysia Derivatives Bhd (BMD) from CME Group Strategic Investments LLC (CMEGSI) for RM162.47 million and an additional sum, following the exercise of a put option under an agreement signed in 2009.

The valuation of the 25% equity interest is based on a pre-agreed formula as prescribed in the shareholders' agreement, Bursa Malaysia said in a filing today.

The additional sum, which is to be determined later, will be based on 25% of the 70% of BDM's operating profit before tax for the second and third quarters of the financial year ending Dec 31, 2019.

The additional sum is arrived at based on the fact that CMEGSI remains as a 25% shareholder of BMD until the completion of the acquisition in early December, it added.

Based on the audited financial statements as at Dec 31, 2018 of Bursa Derivatives Group (which includes Bursa Malaysia Derivatives Clearing Bhd, a wholly-owned subsidiary of Bursa Derivatives), the net profits and the net assets attributable to the 25% equity interest was RM6.57 million and RM12.29 million, respectively.

Following the acquisition, BMD will become a wholly-owned subsidiary of Bursa Malaysia, which will enable the exchange to streamline its assets and expand its offerings in the derivatives business.

The consideration of RM162.47 million and additional sum to be determined will be fully satisfied in cash, said Bursa Malaysia. This will be funded by the disposal of a portion of quoted shares outside Malaysia owned by Bursa Malaysia.

Additionally, Bursa Malaysia said it has signed an agreement with Chicago Mercantile Exchange Inc and CMEG Strategic Sdn Bhd to vary the terms of the existing Globex services agreement.

BMD also entered into a non-binding strategic cooperation agreement with CME, which Bursa Malaysia said signifies CME's commitment to the Malaysian derivatives market. Under the agreement, CME and BMD will explore new products and other business opportunities that will deliver value to their respective customers.

As such, CME will continue to host BMD products on the CME Globex until September 2025. The extended agreement also comes with the option of successive renewal terms of three years thereafter.

Bursa Malaysia said the strategic relationship with CME will continue with the extension of the Globex services agreement and enhanced business collaboration via the new non-binding strategic cooperation agreement.

"We are happy that CME Group will continue to remain with us for the next stage of an exciting journey. We look forward to the opportunity to optimise this working relationship and to facilitate attainment of our goal to develop a robust derivatives exchange and realise the growth potential of the Malaysian derivatives market," said Bursa Malaysia chief executive officer Datuk Muhamad Umar Swift in a press statement.

CME Group's Asia Pacific head cum managing director Christopher Fix said CME is committed to working with BMD to expand the derivatives markets throughout Malaysia and globally.

"CME Group has moved away from holding equity stakes in other exchanges and instead has worked to develop strategic commercial agreements with these institutions to benefit our mutual clients.

"We look forward to continuing to work with Bursa Malaysia through our extended commercial agreement in order to expand the reach of these derivatives markets around the world," Fix added.