Nasdaq OMX Group and IntercontinentalExchange Monday said they intend to start an attempt to acquire NYSE Euronext, offering cash and stock to NYSE Euronext shareholders without the approval of the firm’s board of directors.
“The NYSE Euronext board has continually challenged the seriousness of our proposal and refused to engage us in discussion despite the positive feedback we have received from their stockholders,” said chief executive Robert Greifeld. “The commencement of this exchange offer should convince the NYSE Euronext board of the seriousness of our intentions.”
He said Nasdaq, which operates the Nasdaq Stock Exchange, and ICE, which operatives derivatives markets and clearinghouses,” welcome the opportunity to enter into meaningful discussion with the NYSE Euronext board,” as its offer progresses.
The pair propose to acquire all of the outstanding shares of NYSE Euronext common stock in a cash and stock transaction valued at approximately $11 billion.
Under the terms of the offer, each share of NYSE Euronext would be exchanged for $14.24 in cash, 0.4069 shares of Nasdaq OMX common stock and 0.1436 shares of ICE common stock.
If Nasdaq OMX and ICE are successful this step involving common stock, they would consummate a second step to acquire all remaining NYSE Euronext shares for the same consideration.
The move comes on the second business day after NYSE Euronext chairman Jan-Michiel Hessels told NYSE Euronext shareholders that the Nasdaq-ICE offer is “illusory” because it would not get necessary regulatory approvals.
If Nasdaq and ICE succeeded in their bid, Nasdaq would take over the stock exchange operations of NYSE Euronext, which includes the flagship New York Stock Exchange. ICE would get the company’s derivatives and clearing operations.
The combination of the Nasdaq and New York stock market would re-establish the kind of dominant primary stock market, with about 80 percent share of daily trading volume, that existed a decade ago when federal regulators instituted National Market System rules designed to bring in more competition by encouraging the formation of alternate exchanges, such as those operated by BATS Global Markets and Direct Edge.
Chairman Hessels said that NYSE Euronext’s board was looking for “real value” in a combination with another market operator, such as Deutsche Boerse, and that the board, in the Nasdaq-ICE case, “unanimously determined this would be the wrong thing to do for a number of reasons.”
The DB-NYSE combination would have more “compelling value,” by combining not just stock exchange operations, but European and U.S. derivatives operations as well as clearing businesses.
The DB-NYSE combination would produce stock what would have higher “equity trading value” he said, with NYSE chief executive Duncan Niederauer estimated that the savings produced and revenue gains achieved would push the value of what today is an NYSE Euronext share trading at just under $40 up past $45. NYX shares have traded as low as $26.42 in the past year.
James Rothenberg, a securities attorney and consultant in New York, suggested that NYSE Euronext and Deutsche Boerse break up the Nasdaq-ICE bid by making a “Pacman counter offer” for the assets that are most valuable to them: the derivatives and clearing operations of Intercontinental Exchange.
Having NYSE and DB buy ICE, would be “a very attractive combination” he said and “destroy” the alliance with Nasdaq OMX.Then, he suggested, Nasdaq OMX could be acquired by the new combination at a discount, because Nasdaq OMX would be in a weak strategic position.
NYSE Euronext has said it will ask its shareholders to approve the merger with Deutsche Boerse on July 7.
This story originally appeared in sister publication Securities Technology Monitor
