NYSE Euronext Inks Buyout With Deutsche Boerse
Big Board parent NYSE Euronext (NYSE:NYX) officially reached a deal on Tuesday to sell itself to Deutsche Boerse, handing over control of the iconic New York Stock Exchange to a German company and creating the world’s largest market operator with more than $20 trillion in annual trading volume.
After days of speculation and preliminary announcements, the companies announced the deal Tuesday morning, saying Deutsche Boerse shareholders will own 60% of the new company and NYSE Euronext shareholders will own 40%. They left the sticking point of a name for the combined company unanswered.
The companies said they will combine under a newly-created Dutch holding company, which is expected to generate $400 million in annual cost savings and be listed in Frankfurt, New York and Paris. Each NYSE Euronext share will be converted into 0.47 of a share of the new holding company, putting a 10% premium on the bid before deal talks were announced.
Wall Street may have been hoping for a higher price or even a counter-bid as shares of NYSE Euronext, which soared last week amid the deal talk, slid 3.32% to $38.14 Tuesday afternoon.
In fact, banking sources tell FOX Business’s Charles Gasparino the CME Group (NYSE:CME) and Nasdaq OMX Group (NASDAQ:NDAQ) plan to discuss making a joint bid to acquire NYSE Euronext. Neither CME Group nor Nasdaq would deny the deal talk. The CME Group already operates the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange.
In the Deutsche Boerse/NYSE deal, the combined company is set to have dual headquarters in Frankfurt and New York and be led by a board with 17 members, including 15 directors. Nine of the 15 directors will be tapped by Deutsche Boerse.
NYSE Euronext CEO Duncan Niederauer will be the company's CEO, while Deutsche Boerse CEO Reto Francioni will be its chairman.
“Reto and I are committed to bringing together the best of both organizations to create the premier global exchange group and a leader in the rapidly evolving global financial arena,” Niederauer said in a statement. “This transaction is a catalyst for the development of a global capital markets community, delivering the best, most transparent, and innovative services for clients and issuers, wherever they are.”
“The combination makes sense for all of our constituencies,” said Francioni. “Shareholders of both companies will benefit from unique growth opportunities and synergies. Clients will have unparalleled access to markets, products, information, world-class technology, clearing services and settlement – globally and around the clock.”
Deutsche Boerse did not announce what the name of the new company will be, but the originally-proposed name of DB NYSE came under fire from politicians. Lawmakers on either side of the Atlantic fear putting either “NYSE” or “DB” first in the new name would send the wrong signal about who is in control.
It’s also not clear yet how regulators will weigh in on this deal, but some lawmakers have expressed some concern.
“From a regulatory perspective, we are committed to remaining the world’s most transparent and best regulated platform,” Francioni said.
If the deal goes through, NYSE Euronext/Deutsche Boerse will become the largest exchange group by revenue, with about $5.4 billion in 2010 revenue. The combined company will also bring in 37% of total revenue in derivatives trading and clearing and 29% of revenue in cash listings, trading and clearing.
The companies said they expect the combination to generate annual cost savings of about $400 million, principally from information technology, clearing and market operations. Through cost selling and distribution opportunities, the deal is expected to lead to at least $133 million of annual revenue synergies.
Shares of other market operators slipped on the news, perhaps amid disappointment with the price tag.
Nasdaq OMX Group (NASDAQ:NDAQ), the operator of the Nasdaq Stock Market, slid 3.34% to $28.65. CBOE Holdings (NASDAQ:CBOE), the owner of the Chicago Board Options Exchange, slipped 0.58% to $27.35. CME’s stock inched down 0.48% to $300.19.
The NYSE Euronext - Deutsche Boerse deal comes amid a wave of consolidation in the exchange industry. Late last year Singapore Exchange made a bid for Australia's ASX and then last week Canada's TMX Group reached a deal to sell itself to the London Stock Exchange.