NYSE Euronext and IntercontinentalExchange to Merge in $8.2 Billion Deal

Andrew Klips  |

The age of independence for the iconic New York Stock Exchange looks to be coming to an end. Thursday morning the NYSE Euronext (NYX) agreed to be acquired by fellow exchange operator IntercontinentalExchange Inc. (ICE) in a deal worth about $8.2 billion. The oldest exchange in the United States, the NYSE has been in business for about 200 years.

IntercontinentalExchange has agreed to pay $33.12 per share, a 38 percent premium to Wednesday’s closing price for NYX, in cash and stock. NYSE Euronext shareholders can chose between all cash, 0.2581 ICE shares for each NYX share or a combination of 0.1703 ICE shares and $11.27 in cash for each NYX share.
ICE’s offer carries a maximum cash payout of $2.7 billion, or 33 percent of the total purchase price. The remaining 67 percent will be paid in shares.

As far as executives, IntercontinentalExchange CEO and Chairman Jeffrey Sprecher would keep his position and NYSE Euronext chief executive Duncan Niederauer would serve as President of the merged company and CEO of NYSE Group. The Board of Directors at both companies has unanimously approved the agreement.

The acquisition is expected to close in the second half of 2013.

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The transaction combines the two leading exchange groups to create a premier global exchange operator diversified across markets including agricultural and energy commodities, credit derivatives, equities and equity derivatives, foreign exchange and interest rates. Currently, ICE’s business model is focused on futures trading, where it controls both trading and processing of contracts. Amongst other things, the merger will add stocks and stocks-options trading to ICE’s portfolio of services, making it a more diversified and a stronger rival to peers like CME Group Inc. (CME) and German-based Deutsche Boerse AG (DBOEF).

If approved, Atlanta, Georgia-based ICE will gain control of Liffe, NYSE Euronext’s United Kingdom futures market, a business that it was prepared to pay $6 billion to snare. The UK futures markets are regularly used by big money players as a hedge against movements in benchmark interest rates.

The ICE/NYX merger would make the new company larger than Deutsche Boerse and the third largest exchange group in the world with a market valuation of $15.2 billion.

"Our transaction is responsive to the evolution of market infrastructure today and offers a range of growth opportunities, while enhancing competition in U.S. and European markets and broadening our ability to address new markets and offer innovative products and services on a global platform," said Jeffrey Sprecher in a corporate statement.

In April 2011, IntercontinetalExchange and Nasdaq OMX Group Inc. (NDAQ) had made an $11 billion bid to buy NYSE Euronext in a move that would have given ICE control of NYSE Euronext’s derivatives operations and Nasdaq control of the stock exchange operations. The deal was thwarted as regulators stepped-in and said that antitrust laws would keep them from ever approving the transaction. The April attempt by ICE and NDAQ was their second attempt to acquire NYX, but the unsolicited offers were rejected by NYSE Euronext before every having to clear regulatory hurdles.

Deutsche Boerse AG and NYSE Euronext had agreed to a $9.3 deal to merge in 2011, but the U.S. Department of Justice blocked the deal on similar antitrust grounds.

Given the fact that there is not a large overlap in business between ICE and NYSE Euronext as there was in other proposed mergers, the chances of regulators blocking the new proposed deal are far less.

In early Thursday trading, shares of ICE have shed about 2 percent to $126 per share, while shares of NYX are ahead by 32 percent at $32 per share.

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