Nasdaq OMX Group (Nasdaq) and Intercontinental Exchange (ICE) made official the rumors that they would make a joint bid for NYSE Euronext that have circulated since the announcement that NYSE Euronext and Deutsche Börse (DB) had reached a merger agreement.
NYSE Euronext stated in a release that its board “will carefully review the proposal. NYSE Euronext urges shareholders not to take any action with respect to the proposal.”
The joint bid’s value is $42.50 in cash and stock per NYSE Euronext share, or approximately $11.3 billion. This is a 19% premium over what DB is offering.
Under the terms of the proposed acquisition, NYSE Euronext stockholders would receive $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.
The joint proposal includes plans to break-up NYSE Euronext with the U.S. cash listings, most options and technology businesses going to Nasdaq, and the Liffe derivatives and clearing businesses going to ICE.
During an investor and media call, Nasdaq CEO Robert Greifeld and ICE Chairman and CEO Jeffrey Sprecher highlighted that the deal would provide strategic significance to all parties, would leverage each of their respective companies and that accretion could be realized in as little as 12-18 months after the deal was closed (projected Q4 2011).
Greifeld estimate a total of $740 million in synergies. He said that they plan to keep the NYSE trading floor open and that all the “synergies would come from consolidating the platforms.”
In regards to antitrust issues, Greifeld said that he has spoken with many regulators and noted, “We would not have entered into this agreement without having a degree of comfort that we have a path to closure.”
Sprecher said the derivates piece would be viewed as pro-competition in Europe, something for which the DB proposal has been criticized. “We would be creating a strong global derivatives player [but] not be creating a European monopoly.”
He doesn’t anticipate any antitrust issues on the ICE end of the deal and added that he already has some experience with British regulators (ICE purchased the former International Petroleum Exchange (IPE), now part of ICE Europe. “This [merger proposal] is pretty clean and pretty self evident that it will increase competition, particularly vs. the other one on the table.”
Neither would talk specifics about potential layoffs at NYSE, but both said that, viewed more broadly, it would be a net benefit for job growth. Greifeld said the bid if accepted would “ensure New York is a financial center.” In another shot at the DB proposal, he said there would be a single headquarters in New York, unlike the proposed dual-headquarters in New York and Frankfurt.
Sprecher said, “Job creation is facilitated by strong capital markets. The U.S. is going the wrong way, there is a bigger issue here and that is can the U.S. bring back this fragmented system that we have in place so that we can bring confidence back to the equity markets?” Further, he said it would create competition in the clearing space in Europe.
Additionally, Greifeld and Sprecher pointed out that if NYSE accepts the joint bid, it would involve two United States companies and two United Kingdom companies, or two equity platforms and two derivatives platforms with central clearing.
An obvious hurdle to the joint bid is the high break-up fee in the DB-NYSE proposal of $334 million. While Greifeld said the two companies had talked about who would pay for what, he did not say who would be paying the “generous gift to Deutsche Börse.”
Throughout the call, Greifeld and Sprecher made it clear they had not been in talks with the board at NYSE Euronext and that would be the next step in the bid.
In response to the proposal, the management board at Deutsche Börse said in a statement, “The Management of Deutsche Börse AG continues to strongly believe that the envisaged merger of Deutsche Börse AG and NYSE Euronext is the best possible combination for both shareholder groups and the stakeholders of the companies.”