Nasdaq (NDAQ) LBO Unlikely, Says Goldman; Capital Returns In Focus

February 12, 2013 2:51 PM EST
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Yesterday reports surfaced that Nasdaq OMX (Nasdaq: NDAQ) was in talks with Carlyle Group (Nasdaq: CG) about a potential buyout. News is sketchy, with conflicting reports on whether or not talks are ongoing.

Given the firm's minimal capital requirements, robust free cash flows, stable revenues, and a P/E multiple, Alexander Blostein of Goldman Sachs says the LBO rationale for NDAQ among investors is not a new concept, but he thinks a potential LBO as unlikely at this point.

"While we cannot rule out the possibility of an LBO, we see several key differences between a typical LBO and a potential LBO for NDAQ, including limited potential for synergies/cost-cutting (NDAQ is already very lean, operating with a 44% operating margin) and a lack of identifiable spin-out opportunities," said Blostein.

However, Blostein thinks LBO chatter will help create a catalyst for improved capital returns. Nasdaq's payout, it should be noted, is among the lowest in the group.

Goldman Sachs has a Neutral rating on Nasdaq OMX Group Inc. (NASDAQ: NDAQ)

For an analyst ratings summary and ratings history on Nasdaq OMX Group Inc. click here. For more ratings news on Nasdaq OMX Group Inc. click here.

Shares of Nasdaq OMX Group Inc. closed at $30.38 yesterday.

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