NYSE Euronext (NYSE:NYX) revealed Wednesday that it is in advanced talks to merge with Deutsche Borse in a deal that would hand over control of the New York Stock Exchange to Germany’s biggest stock market operator.
However, the companies said no agreement has been reached as of yet and there aren’t any assurances a deal will come to fruition.
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The statement by NYSE Euronext, which came after trading on its stock was halted, confirms recent buzz about a potential deal. It also follows the buyout of Canada’s TMX by the London Stock Exchange, announced earlier Wednesday.
Under the terms of the deal being talked about, NYSE Euronext shareholders would own about 40% to 41% of the combined company’s equity. Shareholders of Deutsche Borse, which has a larger market cap of about $15 billion, would hold about 59% to 60% of the equity.
Shares of NYSE surged 18.29% to $39.52 once trading resumed.
It’s not clear how regulators or the general public would greet a takeover of the iconic Big Board operator by the Germans. A spokesperson from the Securities and Exchange Commission told Reuters the agency has no comment on the merger talks.
With about 8,000 listed stocks, NYSE is the largest U.S.-based stock market operator, ahead of Nasdaq OMG Group (NASDAQ:NDAQ), the operator of the Nasdaq Stock Market.Many of the world’s largest companies call the Big Board home, including Wal-Mart (NYSE:WMT), ExxonMobil (NYSE:XOM) and JPMorgan Chase (NYSE:JPM).
In addition to the NYSE, the company is also the parent of NYSE Euronext, NYSE Amex, NYSE Alternext and NYSE Arca. Together, its stock markets represent one-third of the world’s equities trading.
“This transaction creates a group that is both a world leader in derivatives and risk management and the premier global venue for capital raising,” the companies said in a statement.
The companies said the combined group would have dual headquarters in New York and Frankfurt. Reto Francioni, the Deutsche Borse CEO, would serve as the company’s chairman and be based in Germany. NYSE CEO Duncan Niederauer would be its CEO and be based in New York.
The stock market operators said they expect a deal would generate about 300 million euros in cost synergies, mostly from economies of scale in information technology, clearing operations and marker operations.
At the same time, the companies said they expect to be able to generate “substantial incremental” revenues from clearing services, product innovation and cross-selling.
“As a true pacesetter across the spectrum of capital markets services, the combined group will offer clients global scale, product innovation, operational and capital efficiencies, and an enhanced range of technology and market information solutions,” they said.
A deal between NYSE and Deutsche Borse would need to be signed off on by the companies’ boards, regulators and shareholders.