US market operators Nasdaq OMX and IntercontinentalExchange (ICE) have made a joint proposal to acquire NYSE Euronext, arguing that a deal would benefit the US as a financial powerhouse.
The bid, for approximately US$11.3 billion, represents a 19% premium over the price proposed by Deutsche Börse in its takeover bid made on 15 February, according to Nasdaq OMX and ICE, and would provide US$740 million in total net synergies by the end of the deal's third year.
By comparison, the NYSE Euronext and Deutsche Börse merger, which is currently under scrutiny by regulators, was expected to realise approximately €300 million in cost savings for the two companies, from economies of scale in information technology, clearing operations, market operations and functions. In addition, they expect to generate substantial incremental revenues from clearing services, product innovation and cross-selling opportunities between the global cash and derivatives businesses.
The firms expected to combine their businesses in all-stock transaction under a new legal entity incorporated in the Netherlands, with Deutsche Börse's shareholders retaining approximately 59-60%, and NYSE Euronext shareholders taking approximately 40-41%, of the combined company's equity.
According to the Nasdaq OMX statement, an all-American combination would “strengthen the international competitive position of the US at a time when companies and investors are increasingly being drawn to other financial centres”.
Since 1995, Nasdaq OMX notes that the number of listings on US exchanges has contracted from 8,000 to 5,000, while non-US exchanges combined have increased from 23,000 to 40,000. It further highlighted that in 2010, the US accounted for 16% of the capital raised globally and attracted only one of the ten largest IPOs.
A Nasdaq OMX/NYSE Euronext combination would merge the trading, listings, options and market technology businesses of the two companies to create a New York headquartered exchange firm. ICE would purchase NYSE Euronext’s derivatives businesses, while Nasdaq OMX would take control of NYSE Euronext’s remaining businesses, including stock exchanges in New York, Paris, Brussels, Amsterdam and Lisbon, as well as the US options business.
According to data vendor Thomson Reuters, NYSE Euronext and Nasdaq OMX accounted for 51.75% of all reported equity trading in the US last year. This is almost five times larger than the next largest competitor BATS Exchange, which accounted for 11.45% of US equity trading in 2010.
Globally, NYSE Euronext and Nasdaq OMX would have represented 33.66% of all reported activity across the US, Europe and Asia in 2010, compared to the 22.38% that NYSE Euronext and Deutsche Börse accounted for last year.
In the derivatives market, ICE would take charge of NYSE's Liffe European and US futures markets and New York Portfolio Clearing, its listed and OTC clearing service, creating an exchange operator with US$1.8 billion in combined revenues. This combination, says Nasdaq OMX, would create meaningful synergies and provide support for “the development of competitors to dominant US and European exchanges”.
Nasdaq OMX believes the deal would also provide significant benefits to its shareholders with accretion for investors expected 12-18 months after the deal is closed and double-digit accretion soon after. ICE’s acquisition of NYSE Euronext's derivatives markets is also anticipated to be accretive to its stockholders in year two.
The two firms would jointly finance the cash portion of the NYSE Euronext acquisition purchase price using cash and a combined US$3.8 billion financing commitment.
According to the statement, both firms have received strong support from a group of leading institutions, including Bank of America Merrill Lynch and Wells Fargo. The latest proposal now requires approval from the majority of Nasdaq OMX and ICE shareholders.
Under the terms of the newly proposed acquisition, NYSE Euronext stockholders would receive US$14.24 in cash, plus 0.4069 shares of Nasdaq OMX common stock and 0.1436 shares of ICE common stock for each NYSE Euronext share.
Nasdaq OMX and ICE have said that their proposal would satisfy the regulatory approvals in both the US and Europe. European regulators are examining potential for a European derivatives monopoly that would be created from a combination of NYSE Liffe and Eurex, the Deutsche Börse and SIX Swiss Exchange-owned derivatives market.
Earlier this week, market operator BATS Global Markets signalled its intention to challenge NYSE Euronext and Nasdaq OMX for US listings from Q4 this year.
“Should a merger of Nasdaq OMX and NYSE Euronext come to fruition, a competitive alternative will become all the more important to issuers,” a BATS spokesperson told theTRADEnews.com on 29 March.
+44 (0)20 7400 7106
+44 (0)20 7400 7105