Chicago-based CBOE Holdings Inc. and Kansas City-based Bats Global Markets Inc. on Monday announced a deal under which CBOE has agreed to acquire Bats for approximately US$3.2 billion. The boards of both firms are supporting the deal.

The cash and stock deal (approximately 31% cash and 69% stock) will significantly expand CBOE’s product line across asset classes, broaden its geographic reach into European equity trading and the global foreign exchange sector, and diversify its business, CBOE says.

CBOE, the operator of the Chicago Board Options Exchange, also expects to migrate trading to Bats proprietary trading technology.

Within three years of the transaction’s closing, CBOE expects to realize US$50 million in annualized expense synergies, increasing to approximately US$65 million within five years by migrating to a single proprietary trading platform and optimizing the expense structure of the combined company. The transaction is expected to be accretive to adjusted earnings per share in the first year following the completion of the transaction.

“The acquisition of Bats is expected to strengthen our position as a global leader in innovative tradable products and services, and is a transformative next step in our growth strategy,” says Edward Tilly, CEO of CBOE, in a news release.

“We believe that bringing together CBOE Holdings’ product innovation, indexing expertise, and options and volatility market position, with Bats’ proven proprietary technology infrastructure, global ETP listing and trading venues, global foreign exchange marketplace and market data services, represents a compelling combination that should deliver significant benefits for our customers and enhanced long-term value for our stockholders,” Tilly adds.

Tilly will remain CEO of the combined company, with Chris Concannon, Bats CEO, becoming president and chief operating officer.

The combined company board will feature three current Bats directors and 11 CBOE directors. The corporate headquarters will be Chicago, with offices in Kansas City, New York, London, San Francisco, Singapore and Quito.

The transaction is subject to customary closing conditions, including the shareholder approval from both companies, and regulatory clearances. The transaction is expected to close in the first half of 2017.

“This transaction offers our stockholders immediate cash value and allows us the opportunity to continue our great growth trajectory by combining with another market innovator in CBOE,” adds Concannon.