CBOE (Chicago Board Options Exchange) will pay around $32.50 per share for the stock exchange operator.
The deal will consist of 31 per cent cash and 69 per cent CBOE stock, based on CBOE Holdings' closing stock price of $70.30 per share on 23 September, 2016.
Shares in BATS surged last week on rumours that a deal was in the works, and closed trading on Friday up 19.9 per cent.
The companies said today that the transaction "will significantly expand CBOE Holdings’ product line across asset classes, broaden its geographic reach with BATS' strong pan-European equities and global FX positions, and diversify its business mix with significant non-transactional revenue streams".
CBOE Holdings said it will "utilise BATS leading proprietary trading technology by migrating trading in all of the combined company’s markets onto a single, proven platform".
"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," said CBOE boss Edward T. Tilly.
"In particular, we believe the complementary nature of our respective offerings uniquely positions the combined company to provide the product set, transparency and tradability demanded by the rapidly-developing index-based investing market. Further, BATS’ market data expertise will allow CBOE Holdings to develop new products using the company’s index calculation capabilities.”
BATS chief executive Chris Concannon added: “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.
“Today’s announcement is a testament to the hard work and achievements of our talented employees around the globe and in every asset class in which we operate. We look forward to working with the CBOE team to facilitate a smooth integration.”
Kansas City-based BATS floated earlier this year, in the biggest US IPO of 2016. It was the company's second attempt at a flotation after it was forced to withdraw an offering in 2012 after a computer malfunction meant its stocks couldn't trade.
In June BATS went head-to-head with the FTSE when it launched the BATS UK 100 or "BUK100".