IntercontinentalExchange Inc., the energy and commodity futures venue that was part of a hostile bid for NYSE Euronext last year, now is in talks to acquire the New York Stock Exchange owner, according to a person with direct knowledge of the matter.
The cash-and-stock proposal may be announced as soon as this week, said the person, who declined to be identified because the talks are private. NYSE Euronext shares rose in late New York trading after the Wall Street Journal reported the negotiations earlier.
Combining the owners of the biggest American stock exchange and the second-largest futures market may revive the wave of exchange takeover offers from 2011, almost all of which failed. ICE’s joint bid with Nasdaq OMX Group Inc. to acquire NYSE was rejected by the U.S. Justice Department on concern the combination would dominate U.S. stock listings.
“This is a much easier deal to get done,” said Brian Barish, who helps oversee about $7 billion including about 4 million NYSE Euronext shares as president and chief investment officer of Denver-based Cambiar Investors LLC. “When Nasdaq was talking about doing something with NYSE, there were obvious antitrust market concentration problems. ICE is a totally different story because they don’t do equities.”
Atlanta-based ICE, its shares up 6.4 percent this year, has a market value of $9.3 billion, according to data compiled by Bloomberg. NYSE Euronext, whose stock fell 7.9 percent in 2012, has a capitalization of $5.8 billion. NYSE Euronext closed at $24.05 earlier and rose as much as 29 percent to $31 in trading after U.S. exchanges closed.
Richard Adamonis, a spokesman at NYSE Euronext, said the company doesn’t comment on rumors. Brookly McLaughlin, an Intercontinental spokeswoman, said the company doesn’t comment of rumors or speculation.
ICE, led by Chief Executive Officer Jeff Sprecher, joined Nasdaq and CEO Robert Greifeld in an unsolicited bid for NYSE Euronext in April 2011. The offer, scuttled by the Justice Department seven weeks later, sought to derail NYSE’s pending merger agreement with Deutsche Boerse AG.
That deal was rejected by European competition authorities in February. NYSE Euronext subsequently began a cost-cutting plan known as Project 14 and said on Nov. 6 that it has made savings of $82 million so far this year, 33 percent of the total $250 million expected by the end of 2014.
In addition to the New York Stock Exchange, the company operates bourses in Paris, Lisbon, Brussels and Amsterdam and London-based Liffe, Europe’s second-largest derivatives market.
Intercontinental Exchange offers contracts based on European energy commodities such as Brent crude, natural gas and heating oil at its London-based ICE Futures Europe exchange. In the U.S., it offers futures on agricultural commodities such as coffee, cocoa and sugar as well as Russell stock indexes and currencies at ICE Futures U.S. The company owns the world’s largest clearinghouse for credit-default swaps, ICE Clear Credit LLC.
With more than 1,000 employees, Intercontinental earned $521.7 million in net income from revenue of $1.3 billion in 2011 when its profit margin was 39 percent. For the first nine months of the year, 87 percent of Intercontinental’s revenue came from clearing and transaction fees.
As of Sept. 30, the company had $1.24 billion in cash and cash equivalents and had issued $400 million in bonds due in 2018 and 2021, according to data compiled by Bloomberg.
Exchange executives have sought to add scale through mergers and acquisitions after the number of U.S. and European trading venues increased by about 50 in the past decade, driving down profitability. Equity-trading has also declined, with daily volume of U.S. exchange-listed securities averaging 6.44 billion shares this year, the lowest level since at least 2008, according to data compiled by Bloomberg.
Populist outcry, antitrust concern and some of the most volatile markets on record have prevented the completion of more than $32 billion in announced transactions, according to data compiled by Bloomberg on deals since October 2010 that were valued at $1 billion or more.
The 25-company Bloomberg World Exchanges Index has rallied 11 percent this year after tumbling 19 percent in 2011. The gauge of market operators averaged gains of 35 percent a year between 2003 and 2010.
Knight Capital Group Inc., pushed to the brink of bankruptcy in August by a trading error, chose this week to pursue a takeover by Getco LLC over a competing offer from Virtu Financial LLC, three people with direct knowledge of the matter said. The Chicago-based high-frequency trader offered $3.75 a share for Knight, one-third of it in stock, for a total value of $1.4 billion, according to a statement yesterday.