Nasdaq and ICE Announce Hostile Takeover Plans for NYSE Euronext

Brittney Barrett  |

The potential Deutsche Börse-NYSE Euronext deal was bested by the Nasdaq OMX and IntercontinentalExchange on Friday when the joint proposal by the two exchanges beat out the German offer by 19 percent. The new proposal offers $42.50 in cash and stock, a deal that is valued at $11.3 billion. The bid designates a 27 percent premium on the stock price of the NYSE prior to February’s Deutsche Börse announcement.

Beneath the terms of the transaction, ICE would claim control of NYSE’s derivatives unit while Nadasq would operate the remaining areas of business, among them, U.S. stock trading and options. NYSE investors would receive a cash sum of $14.24 for every share owned, plus an additional 0.4069 shares of NASDAQ stock and 0.1436 shares of ICE stock.

“NASDAQ OMX will continue to redefine the exchange landscape through technology-driven innovation, creating a global destination to raise capital that will fuel job creation, growth and progress to build investor confidence,” Robert Greifeld, chief executive of Nasdaq said in a statement.

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Greinfelt went on to discuss the “period of historic change,” currently in motion across the industry, referencing the combination of other exchanges like the London (LSE) and Canadian (TSX) stock exchanges. Mergers appear to be the new currency of competition. The deal, announced today would, provided it comes to fruition would help American exchanges regain some of the ground lost to international competitors recently.  Last year, the U.S. was responsible for raising only 16 percent of global capital and American exchanges were affiliated with only one of 2010’s top initial public offerings.

The power house could be potentially beneficial in helping to regain edge on foreign competition, but doesn’t mean that obstacles don’t continue to stand in the way of the massive merger. The new deal is sure to face scrutiny with anti-trust authorities and has already elicited a conversation on how the two exchanges, historically rivals, will function as a team. If the merger does regulatory barriers and the rivalry can effectively be put to rest; however, the deal would make the Atlanta-based ICE, into the world's fourth-largest derivatives exchange by volume. The exchange is currently ranked 14th.

Greinfelt, in his statement, does not address these potential issues. “The combination of the two leading U.S. exchanges delivers an opportunity to build a global exchange platform that has the scale and growth potential to benefit investors, issuers and other market participants,” he said in his statement. “We believe it would increase transparency and liquidity in U.S. markets and create jobs as new companies raise capital.”

The board of the NYSE Euronext has responded that it will review the Nasdaq and ICE proposal. As for Deutsche Börse, it’s unclear as to how they will react and whether they will counter.

There has been some concern about morale on Wall St.  and the effect a German takeover of a patently American symbol of capitalism might have on investors and floor dwellers . The deal announced today would strengthen American exchanges without integrating greater foreign influence over Wall Street.




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