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Non-Tech : Instinet Group, Inc. (INET) -- Ignore unavailable to you. Want to Upgrade?

To: Glenn Petersen who wrote (26)	5/16/2002 2:42:24 PM
From: Glenn Petersen	Respond to of 46

Instinet Reported in Talks to Buy Island Thursday May 16, 11:30 am Eastern Time Reuters Business Report biz.yahoo.com NEW YORK (Reuters) - Instinet Group Inc. (NasdaqNM:INET - News) was reported on Thursday to be in talks to buy rival share dealer Island ECN, in a deal that would end a vicious price war and could create a company to challenge the Nasdaq stock market's trading system. A takeover could come as early as this month and be worth more than $500 million, the Wall Street Journal said. Neither Instinet nor its majority owner, global news and information provider Reuters Group Plc (London:RTR.L - News; NasdaqNM:RTRSY - News), would comment on the report. Instinet shares jumped 12.57 percent to $7.88 on Thursday morning on the Nasdaq, giving them a market value of close to $2 billion. The shares have lost about 45 percent of their value since their public debut at $14.50 a share in May 2001. Completion of the deal would fulfill long-held industry predictions of consolidation among electronic communications networks amid intense competition to woo traders in the two-year bear market. The ECNs have announced a round of price cuts recently, eating away at profit margins. "I think this is really good news," said New York-based analyst Michael Nathanson, of broker Sanford C. Bernstein & Co. "It gives Instinet a low-cost provider of liquidity and it takes out a competitor," he said, adding that Island's trading technology also had the edge over Instinet's older systems. ECNs, which match up buy and sell stock orders electronically, handle about one-third of Nasdaq trading. A combined Instinet and Island would handle more than 20 percent of all Nasdaq shares, improving its ability to connect buyers and sellers, known as liquidity. "It makes it (Instinet) a larger, more competitive, more attractive liquidity pool," said Antonia Ness, a research associate at brokerage firm Raymond James and Associates. "It looks like they are doing what they have to do to be relevant in this market ... taking advantage of the scale that's the basis of the business model." Reuters shares, which have roughly halved over the past year, firmed 1.52 percent to 500.5 pence in afternoon trade on the London Stock Exchange. Instinet, once the group's fastest growing business, reported its first-ever quarterly loss in April and is now a worry for Reuters investors. A deal will enable Instinet and Island to compete better against the Nasdaq's traditional share dealers. Nasdaq, through its own electronic trading systems, handles about 30 percent of trade in Nasdaq-listed stocks and plans to launch a new system, SuperMontage, this summer to win back traders. The two ECNs dispute who is currently tops, with Instinet claiming it won 12.3 percent of the market in April, the latest month for which data are available. Island said it topped the list with an 11.2 percent market share, saying Instinet only had 11 percent. Island's major investors include Datek Online Holdings Corp. and venture capitalists and private equity investors, including Bain Capital, the newspaper report said. Some analysts said Island's owners were likely to prefer a cash offer but Nathanson said Instinet might offer shares in a move that could dilute Reuters' current 83 percent holding. Instinet has cut about 600 employees, or 15 percent of its staff, in the past year. On Wednesday, it said it would pay former Chief Executive Doug Atkin, who stepped down in April, around $4.6 million over the next two years. (additional reporting by Mark Bendeich in London)