NYSE Euronext Rejects Bid by Nasdaq and ICE

BY MICHAEL J. DE LA MERCED

Andrew Gombert/European Pressphoto AgencyA trader on the floor of the New York Stock Exchange.

8:49 p.m. | Updated

NYSE Euronext announced on Sunday that it would reject an unsolicited takeover bid by its rival, the Nasdaq OMX Group, and theIntercontinentalExchange, primarily over antitrust concerns.

Instead, the company, which runs the long-establishedNew York Stock Exchange as well as the Euronext based in Paris, said it would stand by its previous agreement to merge with Deutsche Börse.

The bid by Nasdaq and ICE was a long shot, but the official decision could set off a contest in the coming months to win over the exchange shareholders ahead of a vote scheduled for July.

Nasdaq and ICE had proposed splitting up NYSE Euronext into its two main businesses. Nasdaq would take over the New York Stock Exchange, creating the single biggest stock market in the United States, while ICE would buy the company’s derivatives operations.

Article Tools

• Recommend
• E-mail This
• Print
• Share
• Twitter
• Recommend

Related Links

• NYSE Euronext press release
• DealBook: NYSE Euronext Chief on Rejecting Nasdaq's Bid

The cash-and-stock bid by Nasdaq and ICEannounced more than a week ago is valued at about $11.3 billion, or about $43.13 a share as of Friday. The bid was worth more than Deutsche Börse’s all-stock agreement with NYSE Euronext, valued at $9.7 billion, or $36.98 a share.

NYSE Euronext shares closed on Friday at $38.70, suggesting that shareholders may expect a richer offer from Deutsche Börse.

The board and management on Sunday outlined a litany of concerns about the Nasdaq proposal, calling it “highly conditional” and arguing that it poses “unacceptable” risk to shareholders.

“Their loosely worded proposal didn’t address the rather obvious execution risks,” Duncan L. Niederauer, the chief executive, said in a telephone interview on Sunday.

The company said the chief concern was that the Nasdaq bid might not survive review by antitrust regulators. Nasdaq and ICE expect about $740 million in cost savings three years after the deal closes, a figure driven by cutting jobs and eliminating duplicate back-end systems. That raises the risk that lawmakers, like Senator Charles E. Schumer of New York, may raise objections over the prospect of job losses in New York City.

In its statement, NYSE Euronext also said it was also concerned about the amount of debt Nasdaq would borrow to finance its offer. Both Standard & Poor’s andMoody’s have indicated that they may downgrade Nasdaq’s credit rating if it proceeds with the bid.

NYSE Euronext instead highlighted the benefits of the company’s agreement to merge with Deutsche Börse, which would create a trans-Atlantic powerhouse in stock, options and derivatives trading. The exchange itself has sought to build itself up over the years. Its merger in 2006 with Euronext — which operates in several cities including Paris, Amsterdam and Brussels — significantly added to its offerings in the highly profitable derivatives trading business.

“We’ve had a long-term strategy that we’ve been following for several years,” Mr. Niederauer said. “To break up the company and sell it off in pieces is entirely inconsistent with that strategy.”

A merger of NYSE Euronext and Deutsche Börse has been two years in the making, aimed at improving profit by increasing scale. Both the Big Board and Nasdaq have lost some ground to upstart electronic markets like BATS and Direct Edge.

Deutsche Börse expressed confidence late Sunday that the merger with NYSE Euronext would go forward as planned and close by the end of the year. In a cautiously worded statement, Deutsche Börse suggested that it would offer more growth opportunities for the company than Nasdaq as well as wider geographic distribution, and more kinds of assets to trade.

Deutsche Börse also noted that the parties have already begun seeking regulatory approval, and started planning how to combine the two companies.

Robert Greifeld, Nasdaq’s chief executive, urged NYSE Euronext to meet with his company to discuss the merits of the proposal.

“NYSE Euronext’s board of directors is depriving its stockholders of the benefits of a superior proposal,” he said in a statement.

Exchange operators around the globe have been consolidating, aiming to seek greater scale to drive bigger profits. But several of those proposals have run into political obstacles, as national regulators fear diminishing their countries’ standings as global financial capitals.

Last week, Australia formally rejected the Australian Securities Exchange’s plan to merge with the Singapore Exchange, saying the deal “would not be in the national interest” in its current form. And Canadian lawmakers are closely scrutinizing the Toronto Stock Exchange’s proposed merger with the London Stock Exchange.

Nasdaq’s offer is being pitched as creating a new national champion, one based in New York and able to draw new stock listings that might otherwise head to foreign markets.

Deutsche Börse and NYSE Euronext plan to keep dual headquarters in Frankfurtand New York. Reto Francioni of Deutsche Börse would become chairman of the combined company, while Mr. Niederauer of NYSE Euronext would become its chief executive. Deutsche Börse shareholders would own 60 percent of the merged company, though both exchange operators have argued that the deal is a “merger of equals.”

But Mr. Niederauer dismissed concerns about the United States losing status as a financial haven, arguing that the exchange already operates with headquarters in New York and Paris.

“I don’t know that we would necessarily to do that deal to build an American stronghold,” he said. “We’re competing just fine.”