UBS AG (UBS) acquired an equity stake in Chi-X Global Holdings LLC. The financial terms of the deal were not disclosed. Chi-X Global is an operator of technologically advanced alternative market centers and a provider of innovative market level trading solutions.
Chi-X Global operates Chi-X Australia, Chi-X Canada and Chi-X Japan. It also operates Chi-East in a 50:50 venture with a subsidiary of the Singapore Exchange. Chi-X Global is owned by a consortium of major financial institutions.
It is a win-win situation for both parties to the deal. For UBS AG, the stake acquisition of would help the company with better control over the market. On the other hand, the capital infusion at Chi-X would facilitate in its expansion efforts.
Through this stake acquisition UBS AG joins the consortium of BofA Merrill Lynch, a part of Bank of America Corp. (BAC), GETCO LLC, The Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), and Quantlab Group LP which have recently acquired a minority stake in the firm. However, Nomura Holdings Inc. (NMR) remains the largest equity holder through a subsidiary company.
In November, UBS AG held its Investors Day in New York where the company came up with some long-term targets that reflect its growth strategies. Among others, the company announced its plan to scale down several businesses and cut nearly 2,000 jobs. Moreover, the bank plans to concentrate on its wealth management business.
Encouraging its investors, UBS announced the dividend of CHF0.10 per share for 2011. Previously, the company paid cash dividend of CHF 2.20 per share in 2006, which was abandoned thereafter following huge losses of more than $50 billion in write-downs on illiquid securities in the financial crisis.
The stake acquisition in Chi-X is a strategic fit. We also expect UBS to successfully meet its planned developments and strategies. Moreover, despite the sluggish economic recovery, achievement of the set targets in the long term will act as a catalyst for the company.
UBS AG shares currently retain a Zacks #5 Rank, which translates into a short-term Strong Sell rating.
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