Reuters

(Reuters)

Nasdaq Pushing NYSE Shareholders to Remove Niederauer From Deal

By Industries FOXBusiness

Officials from Nasdaq and the Intercontinental Exchange are imploring shareholders of the New York Stock Exchange to prod NYSE board members to force the Big Board CEO, Duncan Niederauer, to formally remove himself from dealing with the joint bid offered by the two exchanges to purchase pieces of the NYSE, the FOX Business Network has learned.

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The move comes as the NYSE continues to reject the joint bid and moves forward with its merger with Germany’s Deutsche Borse. On Thursday, the NYSE formally rejected the Nasdaq/ICE bid for the second time. It came just two days after Nasdaq/ICE officials announced a number of “sweeteners” to their bid, which already offers NYSE shareholders a price that’s about 20% higher than they will receive if the Deutsche Borse and NYSE formally combine.

Although NYSE officials have termed their deal with the Germans a merger, with Niederauer becoming the new entity’s CEO, in reality the Germans will own nearly 60% of the new company and thus control the majority of the new exchange’s board seats.

The NYSE and Niederauer rejected the Nasdaq/ICE on Thursday citing the same reasons for the past rejection, namely that the deal is too risky because combining the stock markets of the NYSE and Nasdaq would pose insurmountable anti-trust problems, and because the Deutsche Borse deal offering market making in the fast growing derivatives business offers more long-term value to its shareholders, both of which officials at the Nasdaq/ICE say is untrue.

Now officials at the Nasdaq and ICE are stepping up their efforts to portray Niederauer as an executive who is putting his interests above the interests of the shareholders, and according to people close to the matter, are imploring shareholders to confront board members of the NYSE to remove Niederauer from dealing with the takeover and have a more independent entity weigh the pros and cons of their higher bid.

The FOX Business Network has reported that Nasdaq and ICE officials were weighing whether to turn up the heat on the NYSE by formally asking the board to remove Niederauer from the process through a letter to the NYSE’s chairman, Jan-Michiel Hessels.

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While that might still occur, right now Nasdaq and ICE officials are appealing to large shareholders over pressuring the NYSE for an independent review, which includes removing Niederauer, who will in all likelihood lose his job if the Nasdaq/ICE bid is successful.

It’s difficult to determine just how successful the Nasdaq and ICE have been in persuading shareholders to approach the NYSE regarding Niederauer. One problem facing the Nasdaq and ICE is that the NYSE board seems to be standing firmly behind Niederauer, as is the board of the Deutsche Borse.

Even so, there is some indication that shareholders -- who would get the final say on any change in ownership -- want the NYSE to at least formally consider the Nasdaq/ICE bid before rejecting it. Several people close to the takeover battle have told FBN that one of the largest NYSE shareholders, T. Rowe Price, sees some merit in the higher bid by the Nasdaq and the ICE, as well as their proposal to break up the exchange with the Nasdaq taking the equities portion, and the ICE taking over the NYSE derivatives business currently run by the NYSE.

In fact, Barclays Capital estimates that many long-term shareholders of the NYSE have sold their shares and that a 20% chunk of the “float” or outstanding stock that is actively traded is held by traders known as “Arbs” who would normally favor a 20% higher bid because they don’t buy stocks based on long-term bets such as the NYSE and Deutsche Borse are offering.

A spokesman for the Nasdaq declined to comment as did an NYSE spokesman.

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