Nasdaq, ICE in $11.3bn bid for NYSE Euronext
New York, April 2, 2011
Nasdaq OMX and IntercontinentalExchange (ICE) bid $11.3 billion for NYSE Euronext in an effort to trump Deutsche Boerse's deal, and pushed their case with an appeal to US patriotism.
The counterbid - unveiled on Friday to some skepticism it can succeed - would redraw the world's capital markets so that Americans have a stronger hand than Europeans as exchange operators globally maneuver to come out on top.
The move presents US 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, a 12 per cent premium to Deutsche Boerse's $10.2 billion all-stock bid, based on Thursday's closing prices. It would give NYSE shareholders cash and stock.
Antitrust questions, and concerns over jobs and Nasdaq's debt ratings, surround the agreement to split NYSE Euronext's stock business, which would go to Nasdaq, from its more profitable derivatives business, which ICE would get.
The pair had been left out of a recent merger frenzy, leaving them anxious to do something.
Bringing Nasdaq and NYSE Euronext together will create a stock-trading powerhouse in the US and Europe that would also have a monopoly in listing US public companies, and dwarf other US options markets. It would be called Nasdaq NYSE Euronext.
In selling the unsolicited deal, Nasdaq chief executive Robert Greifeld - for years a fierce cross-town rival of NYSE's Duncan Niederauer - and ICE's Jeffrey Sprecher appealed heavily to the US' thirst for remaining the world's financial center, its anxiety about losing out on new listings, and its need for a more stable market.
'The US can change its current course,' Sprecher said on a call with analysts and media. 'We believe that there is a better combination that provides scale and takes even more costs out of the system' than the Deutsche Boerse deal.
Greifeld, who like Sprecher has a mixed deal-making record, said NYSE's surprise decision to sell out to the German bourse 'represented an unplanned-for opportunity,' calling his offer 'clearly superior.'
Already, the Deutsche Boerse bid was expected to attract intense regulatory scrutiny as the merged company would have a lock on European derivatives trading and clearing. The counterbid shifts the antitrust focus to whether one entity should have a lock on capital-raising in the US.
Combining Nasdaq and NYSE - perhaps Wall Street's fiercest rivals over the last couple decades - could find trouble with the Justice Department's Antitrust Division. Greifeld said the companies reached out to regulators, calling any issues 'manageable.'
Early reaction out of Washington was cautious, though some lawmakers were cool to the deal.
Nasdaq, smallest of the four exchanges in play, needed to do something to stay relevant in the years ahead, some said. If it and ICE succeed, the world's largest bourse operators would be headquartered in the US, Brazil, and Asia - leaving Europe with a bruised Deutsche Boerse.
'Nasdaq had a real risk of being marginalized,' said David Weild, founder of Capital Markets Advisory Partners and former vice chairman at Nasdaq, in the corporate client division.
Under the proposal, Atlanta-based ICE would purchase NYSE's London-based Liffe platform, seen as a profitable gem, while Nasdaq would acquire its stock exchanges in New York, Paris, Amsterdam, Brussels, and Lisbon, its US options venues and its technology suite.
Some details of how a deal would work have not yet been worked out. The management and the board of directors have not yet been determined, Greifeld said, adding he hadn't spoken to Niederauer or other NYSE executives.
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.
'From a purely nationalist point of view, as an American, a lot of people are going to say yeah, yeah, yeah, that's great,' said Kenneth Polcari, managing director at ICAP Corporates, a NYSE floor broker.
'But from a business point of view ... from a true global perspective, the Deutsche Boerse is probably the better option,' he added.
Borse Dubai, Nasdaq's largest shareholder, and Sweden's Investor AB, the second-largest, said they backed the bid.
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.'
NYSE Euronext said its board would 'carefully review' the new offer and urged shareholders not to take any action pending its review.
Under the counterbid, NYSE shareholders would receive $14.24 in cash plus 0.4069 of a share of Nasdaq stock. The Deutsche Boerse proposal would exchange each NYSE Euronext share 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 annual operating costs.
The Deutsche Boerse deal sees $400 million in cost savings and that immediately add to adjusted earnings.
Bank of America Merrill Lynch and Evercore Partners are advising Nasdaq, while Lazard, Broadhaven Capital Partners, and BMO Capital Markets Corp are advising ICE.-Reuters