NYSE Bids $21 Billion for Euronext Exchange

The consolidation of the world’s stock exchanges is rapidly turning into a game of musical chairs. On Friday, NASDAQ announced that its holdings in the London Stock Exchange had topped 25%. Over the week-end, media reports said that the New York Stock Exchange had bid $21 billion for Euronext. Germany’s Deutsche Borse looks like it’s the odd exchange out – for now.

The NYSE has been after a European exchange for some time, as has NASDAQ, and the price has been rising as various offers have been rebuffed. According to The Times, “The NYSE Group will convert its existing shares in a new company, NYSE Euronext, and then offer 0.98 of these plus €21.32 cash for each Euronext share. Based on NYSE's closing price on Friday of $64.5 (€50.6), the offer values each Euronext share at €70.9 and values the group at €7.87 billion. Euronext shares were trading up 0.27% at €74.8 after the terms were announced.”

Euronext controls the stock trading of Paris, Amsterdam, Brussels, Lisbon and the London Liffe derivatives exchange. NYSE Euronext, therefore, would combine these markets with the New York market to create a much bigger, and one expects more efficient, transatlantic operation. Estimates are that $375 million in costs savings would accrue to the new firm.

Where it gets interesting is in Deutsche Borse’ response. DB had made a broad merger offer, without a price, on Friday, and Euronext rejected it. Analysts expect another offer with pricing details to follow in a matter of days at most. If DB manages to snatch Euronext from NYSE, the result will be a Pan-European exchange, which has a much different profile than a transatlantic one. EU politics may enter the fray before much longer.

Euronext has its annual shareholders’ meeting tomorrow, and it promises to be high theatre. US hedge fund Atticus Group is leading a group of dissident shareholders who insist that an offer be accepted or they will vote to replace the board of directors. Other shareholders have broken off into pro-NYSE and pro-DB factions. Stay tuned, as this isn’t anywhere near over.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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