CME Group Inc. will buy 90 per cent of Dow Jones' namesake indexes business in a debt-funded joint venture that values the business at $675-million (U.S.), the two companies said Wednesday.
Dow Jones will retain a 10 per cent stake in the venture, called CME Group Index Services, which will raise some $613-million in third-party debt. Dow Jones will get $607.5-million of the proceeds.
The Dow name will remain to preserve the familiar Dow Jones Industrial average name, under terms of the deal with Dow Jones & Co.'s owner News Corp.
The deal gives Chicago-based CME Group, the world's largest derivatives exchange operator, a key asset beyond 2014 when its exclusive right to offer futures on the Industrial average and other Dow indexes would have expired.
"We would expect to continue to have very, long-term licence rights," CME Group chief executive officer Craig Donohue said on a conference call with reporters, adding 90 per cent of the joint venture's earnings will flow directly to CME.
CME Group will contribute a portion of its market data services, valued at $613-million, to the joint venture. Dow Jones will continue to own the brand.
Dow Jones Indexes creates and licenses indexes that investors and others use to measure the performance of markets including stocks, bonds, and real estate. The business offers more than 130,000 equity indexes, according to its Web site.
The deal is expected to close in the current quarter.
CME Group currently pays Dow Jones licensing fees that let it offer futures and options contracts based on the Dow industrials.
The deal gives CME Group rights to the globally recognized indexes. It also represents yet another proprietary product for the company, whose core business relies on products that cannot be transferred to other exchanges.
CME Group had $260.6-million of cash, and $2.3-billion of long- and short-term debt, at the end of 2009.