For Nasdaq chief Robert Greifeld, it's back to the drawing board.
For nearly six weeks, Greifeld has engaged a variety of lenders and partners to cobble together a financing plan that would enable him to launch a hostile bid on his main rival, the New York Stock Exchange -- a daring move that, if successful, would break up the NYSE's planned mega merger with the Frankfurt Exchange. But sources close to the deal tell the Fox Business Network that the plan has been dealt a major blow: Greifeld's latest partner in the takeover effort, the Intercontinental Exchange, also known as ICE, has officially backed away from the bid under its most recent terms.
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Sources say the situation remains fluid, and could change any time. But they also say the Nasdaq chief is running out of options if he wants to upend the NYSE/Frankfurt merger, a move that would cost him $13 billion or possibly more given the NYSE/Frankfurt merger pricetag of about $9 billion. Greifeld would either have to woo the ICE with much more favorable terms (the financing terms has been one of the major stumbling blocks during the last several weeks of negotiations between the two exchanges). He could also turn to another partner, or launch the bid itself, with each option carrying its own set of complications.
Contacted on Sunday afternoon, a spokesman for the Nasdaq wouldn't deny that the ICE has told the Nasdaq that it doesn't intend to go forward with the bid under the current terms; a spokesman for the ICE didn't return a telephone call and email for comment.The ICE’s decision will likely have major implications for the Nasdaq and Greifeld. If the Nasdaq cannot upend the NYSE-Frankfurt deal, it finds itself in a weakened competitive position. The NYSE teamed up with the Frankfurt exchange because its bread and butter business, matching buyers and sellers of stocks, has faced increasingly shrinking profit margins in recent years. The Frankfurt exchange, also known as the Deutsche Borse, specializes in the trading of derivatives, which is a business with higher growth and profit opportunities.
Left alone in the new competitive environment, Nasdaq -- which also specializes in matching buyers and sellers of stocks -- would possibly be forced to expand elsewhere or sell itself to a number of bigger players, including the ICE and the Chicago Mercantile Exchange, whichhave discussed the possibility in the past.Meanwhile, the failure to mount a bid for the exchange would likely lead to more scrutiny on Greifeld's leadership of the Nasdaq.
During his tenure he's earned the reputation for aggressive deal making, including a failed attempt to mount a hostile bid for the London Stock Exchange. With that deal making the Nasdaq under Greifeld has been burdened by large levels of debt on its balance sheet, a complicating factor in the NYSE hostile or even an attempt to expand so it can remain independent since the borrowing that would accompany any deal might sink the Nasdaq's bond rating into "junk" territory, or below investment grade and thus lead to higher borrowing costs.
Failing to make any attempt at a hostile would also damage Greifeld's reputation on Wall Street since so many traders in recent days had bid shares of the NYSE up on the expectation that Nasdaq would follow through. Shares of the NYSE have since fallen along with expectation he could pull off the deal.
"Greifeld would have some explaining to do," said one senior Wall Street executive who has detailed knowledge of Nasdaq's intentions.All of which is why people close to the Nasdaq aren't eliminating the possibility that Greifeld will at least attempt to make a bid on the NYSE sometime soon, even if it means sweetening the terms of a deal to entice the ICE to return to the bargaining table, or turning once again to the Chicago Mercantile Exchange, which was the first exchange to hold talks with the Nasdaq to bid on the NYSE.
"The one thing that's been certain through all of this is that Greifeld really wants to bid on the NYSE," the senior executive added.