Feb 6, 2023
Carlyle to Sell Metals Trader Traxys to Group Led by High-Frequency Firm Optiver
(Bloomberg) -- Carlyle Group Inc. and hedge fund tycoon Louis Bacon agreed to sell commodity trader Traxys to a group of investors led by high-frequency firm Optiver, and also including the company’s management.
The deal could see Optiver and Traxys join forces to develop new derivatives markets for the niche metals Traxys specializes in, said Chief Executive Officer Mark Kristoff. Dutch firm Optiver is a top market maker in liquid electronic markets such as exchange-traded funds, while Traxys is a mid-sized physical trader with a focus on metals like rare earths, cobalt and tin.
The shift away from fossil fuels is triggering a surge in demand for the metals used in batteries and renewable electricity, but prices are often opaque and derivatives markets underdeveloped. A massive short squeeze on the London Metal Exchange last year has thrown the future of nickel pricing into doubt, while a race is on to develop derivatives contracts for other key battery metals.
“With the challenges that the LME has encountered, with the development of cobalt and lithium contracts on the CME, we see an opportunity to be in on the ground floor of developing derivative contracts,” Kristoff said in an interview.
Optiver CEO Jan Boomaars said the company looked forward to “applying our principles and know-how to bring greater efficiency to the physical commodities markets.”
The deal, which is expected to close in May, means that Traxys will no longer be owned by private equity investors for the first time since it was formed in 2003 as a combination of the trading units of European industrial giants Umicore and Arcelor.
Carlyle had been seeking for some time to sell its stake, having joined forces with Bacon to buy a majority of Traxys from its previous private equity owners in 2014.
The move away from private equity ownership means Traxys will no longer have shareholders that need to recycle their capital within a set timeframe, Kristoff said. Private equity groups typically seek to realize their investments within a decade.
Alongside Optiver, which will own about 40% of Traxys, the company’s management is increasing its stake to about 20%. The other investors are CoLift, Regent Mercantile Holdings Limited and LOM Financial Group, which Kristoff described as “large family office investors that have a particular bias to investing in the metals and mining sector.”
Kristoff declined to comment on the price of the deal, but a recent memorandum seen by Bloomberg News showed that Traxys was seeking investment at a valuation of about $300 million, equivalent to around 80% of net tangible book value.
“We negotiated the purchase price some time ago and the company has continued to perform very well in the ensuing period, generating over 20% return on equity in 2022,” Kristoff said.
He said that Traxys was on track for strong performance in the coming year.
“Like everybody around the globe we were concerned about potential global recessionary pressures, but we have not seen any marked deterioration of activity levels across our portfolio.”
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