CME Group Inc. announced on Feb. 10 that it was forming a joint venture with Dow Jones & Co. to create a global financial index services business.
The announcement came after a week of speculation that a deal, specifically one in which CME would acquire Dow Jones' index business, was in the works.
The Chicago-based futures and options exchange has apparently been eyeing some kind of deal with Dow Jones for months.
CME Group would own 90% of the joint venture, which will be called CME Group Index Services. Dow Jones will own the remaining 10% and contribute its indexes business, a unit reportedly valued at $675 million. Dow Jones would continue to own and manage its venerable Dow Jones Industrial Average and give the joint venture permission to license the Dow Jones name.
Dow Jones will receive $607.5 million, which the joint venture will raise through $613 million in third-party debt.
The joint venture will allow CME to "further diversify our revenue streams" by expanding its "index and market data offerings as well as to fuel growth opportunities in our equity index complex," Terry Duffy, CME Group's executive chairman, said in a statement.
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 currently pays Dow Jones licensing fees that let it offer futures and options contracts based on the Dow industrials.
Dow Jones is owned by New York-based News Corp., which bought the company in 2007.
The deal will give Dow Jones "the opportunity to tighten its focus on its news and business information products while preserving and protecting an iconic business brand," CEO Les Hinton said in a statement.
The transaction is subject to regulatory approval and is expected to close before March 30.
(Reuters contributed to this report.)
Lorene Yue is a reporter at Crain's Chicago Business, a sister publication of Pensions & Investments.