NYSE Euronext and Deutsche Börse in Merger Talks
By JACK EWING and DAVID JOLLY
New York Times
February 9, 2011, 11:53 am
4:48 p.m. | Updated
FRANKFURT — The operator of the Frankfurt Stock Exchange is in advanced talks to acquire the owner of the New York Stock Exchange, whose frenzied floor brokers have been a global symbol of capitalism for years.
A combination of the two companies, NYSE Euronext and Deutsche Börse, would offer trading in stocks and derivatives. The deal would also cap a decade of active cross-border market consolidation that reflects how much of investing is global and technology driven.
The new company would have headquarters in both New York and Frankfurt and equal seats on the executive committee, but Deutsche Börse shareholders would hold about 60 percent of the shares in the combined company. Deutsche Börse’s chief executive, Reto Francioni, would serve as chairman from Frankfurt, the companies said. Duncan Niederauer, chief executive of NYSE Euronext, would serve the same role for the combined company.
In a statement, the companies warned that they might not be able to reach an agreement, a standard disclaimer that in this case may be warranted. Deutsche Börse has a history of efforts to merge with other exchanges, including the NYSE and the London Stock Exchange, but they have fallen apart.
Combining electronic trading systems is extremely complex, and political leaders have sometimes been reluctant to allow their national exchanges to pass into foreign hands. There may also be objections from antitrust authorities. While customers might benefit from the enormous liquidity of the combined exchange, regulators might worry about a lack of competition in the fees charged to conduct transactions.
Still, there is pressure on exchanges to get bigger and achieve maximum trading volume, and some analysts said that the time was right.
“Most exchanges now have experience in tran-Atlantic mergers, so the track record is there for making this work,” said Elie Darwish, an analyst at Exane BNP Paribas in Paris. “There is a race toward exchanges becoming ever bigger. This would give NYSE-Euronext-Deutsche Börse an unchallengeable position.”
Also on Wednesday, the London Stock Exchange and the TMX Group, the parent company of the Toronto Stock Exchange, announced an all-share merger. If approved by shareholders, the combined exchange would form what would probably be the largest market for mining and natural resource stocks.
Last year, SGX, the Singapore exchange, moved to buy its Australian counterpart, ASX, another exchange with a heavy emphasis on natural resource stocks. That deal is valued at $8.3 billion.
NYSE Euronext is itself the product of a 2007 merger between the New York Stock Exchange and the company that operates the main stock exchanges in Paris, Amsterdam and Brussels.
While the Frankfurt Stock Exchange is smaller than its New York counterpart, Deutsche Börse has a larger market capitalization because its holdings also include Eurex, the world’s largest derivatives exchange, and Clearstream, which provides settlement and other back-office services for investors.
Deutsche Börse has a market value of about 11.4 billion euros, or $15.6 billion, while NYSE-Euronext is worth about $10.1 billion.
The companies said they expected to save 300 million euros a year by combining information technology systems, corporate management and other operations.
Shares of NYSE Euronext surged more than 17 percent in trading on Wednesday.
Mr. Darwish said the deal would be complementary, meshing Deutsche Börse’s businesses in European equity derivatives and long-term European interest-rate derivatives, and NYSE-Euronext’s short-term European interest rate business.
Because both companies have long histories and are symbolic of their national financial systems, the deal could draw political as well as regulatory scrutiny. Spokespeople for the Securities and Exchange Commission and for Joaquín Almunia, the European Union competition commissioner, declined to comment on how they might react to a merger.
Jack Ewing reported from Frankfurt. David Jolly reported from Paris.
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