By Lauren Tara LaCapra
NEW YORK (Reuters) - Nasdaq OMX and IntercontinentalExchange unveiled an $11.3 billion bid for NYSE Euronext in an effort to trump Deutsche Boerse's plan to acquire NYSE.
The move presents U.S. lawmakers and regulators with a dilemma: whether to allow a German exchange to take control of the venerable New York stock exchange, or to allow the creation of a dominant American-run platform with massive market power.
The new offer is valued at $42.50 per share, Nasdaq and IntercontinentalExchange said. The offer represents a 19 percent premium to NYSE's closing price on Thursday and is 27 percent above the company's valuation before Deutsche Boerse's $10.2 billion bid in February. NYSE shareholders would receive cash and stock.
The offer, announced on Friday, could raise new antitrust questions as it would combine the two largest U.S. stock exchanges.
Already, the Deutsche Boerse bid was seen as likely to attract intense regulatory scrutiny as the merged company would have a lock on European exchange-traded derivatives.
Deutsche Boerse's bid had also stirred political backlash from some lawmakers who opposed the idea of a foreign company taking over an emblematic Wall Street brand.
Under the proposal, ICE would purchase many of NYSE's valuable derivatives business while Nasdaq would acquire its stock exchanges and U.S. options businesses.
"It's quite a bold move from Nasdaq and ICE. Certainly I think the premium they're paying is quite high ..," said Karl Morris, an analyst at Keefe Bruyette & Woods in London. "It makes you wonder what Deutsche Boerse is going to do about this and I struggle to see how they can lift their bid to match."
Some details of how a deal would work have not yet been worked out. Nasdaq Chief Executive Robert Greifeld said on a conference call that the management and the board of directors have not yet been determined, and that he hasn't spoken to the NYSE management team.
But a group of banks led by Bank of America and Wells Fargo is prepared to arrange $3.8 billion of financing for the cash portion of the deal, Nasdaq and ICE said.
NYSE shares jumped about 11.6 percent to $39.26, while Deutsche Boerse shares were down 1 percent in Frankfurt.
Nasdaq shares rose 1.8 percent to $26.30 and IntercontinentalExchange shares slipped 4 percent to $118.62 in morning trade.
Deutsche Boerse said it "continues to strongly believe that the envisaged merger of Deutsche Boerse AG and NYSE Euronext is the best possible combination for both shareholder groups and the stakeholders of the companies."
For now, Deutsche Boerse is studying the offer and relying on Nasdaq shareholders and U.S. regulators to scrutinize the deal before deciding its next move, a person familiar with Deutsche Boerse's thinking said on Friday.
NYSE Euronext said its board would "carefully review" the new offer and urged shareholders not to take any action pending its review.
The counterbid comes amid an expected wave of tie-ups in the increasingly competitive and global exchange business, where companies are linking up and pushing into derivatives to survive and grow.
Bringing Nasdaq and the New York Stock Exchange together would create a stock-trading powerhouse in the United States and Europe that would also dominate the business of listing U.S. public companies, and dwarf other U.S. options markets.
If successful, a counter-offer could redraw the global exchange map and be a bold move by Nasdaq Chief Executive Robert Greifeld, who has a mixed deal-making record.
ICE, an Atlanta-based futures specialist, would get London's profitable LIFFE platform, giving CEO Jeffrey Sprecher an interest-rate business that eluded him when ICE's bid for the Chicago Board of Trade failed four years ago.
But with other exchange deals driven largely by a need to diversify and ramp up profitable derivatives trading, a Nasdaq deal with the NYSE would only expand in the core, low-margin, stock-trading business -- and could raise questions for shareholders.
In a flurry in February, Deutsche Boerse agreed to buy NYSE, the London Stock Exchange Group Plc announced a deal to take over Canadian market operator TMX Group Inc and BATS Global Markets said it will buy peer Chi-X Europe.
Under the counter-bid, NYSE shareholders would receive $14.24 in cash plus 0.4069 of a share of Nasdaq stock.
Under the Deutsche Boerse proposal, which still awaits approval by shareholders and regulators, each share of NYSE Euronext stock would be exchanged for 0.47 share of the combined company's stock.
Nasdaq and ICE said that within 12 to 18 months, the combined franchise would provide "double-digit accretion" to shareholders and save $740 million in operating costs per year.
The deal outlined by Deutsche Boerse would deliver $5.4 billion in total combined revenue and $400 million cost savings and immediately add to adjusted earnings for shareholders, according to those companies.
Bank of America Merrill Lynch and Evercore Group are advising Nasdaq, while Lazard, Broadhaven Capital Partners, and BMO Capital Markets Corp are advising ICE.
(Additional reporting by Edward Taylor in Frankfurt and Jonathan Stempel in New York, editing by Dave Zimmerman)