Market Overview

Analysts See Risks To EPS Upside From CBOE-Bats Deal


Goldman Sachs sees risks to EPS upside from CBOE Holdings, Inc (NASDAQ: CBOE)'s $3.2 billion acquisition of Bats Global Markets Inc (BATS:BATS) from potential P/E de-rating.

"Our hypothetical pro forma analysis suggests a potential deal would result in $3.41- 3.52 in adjusted EPS for CBOE for 2018, or 22%-26% accretion vs. GSe and 17%-20% to cons. estimate," analyst Alexander Blostein wrote in a note.

"At the same time we see risk that a change in CBOE's product mix (away from higher multiple Index Options/Futures and toward cash equities and multi-listed options) and potentially higher leverage (current CBOE is debt free) could result in a 21%-32% P/E de-rating for the stock based on public comps with similar revenue mix," Blostein continued.

Related Link: CBOE, Bats Deal Viewed Favorably By Jefferies

Further, the analyst expects pressure on the multiple as the deal may be a signal of "(1) limited EPS growth at CBOE (consensus implies flat EPS for 2016) and (2) risks from rising competition in the multi-listed options space (from BATS and NDAQ/ISE."

Blostein reiterated his Sell rating on CBOE with price target of $61.

Shares of CBOE traded recently at $67.01.

Latest Ratings for BATS

Oct 2016CitigroupReinstatesNeutral
Oct 2016JefferiesMaintainsHold
Sep 2016Goldman SachsMaintainsNeutral

View More Analyst Ratings for BATS
View the Latest Analyst Ratings


Related Articles (CBOE + BATS)

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