NYX Nyse Euronext

Germany's Deutsche Boerse AG (DB1.XE) and U.S. exchange operator NYSE Euronext (NYX) have agreed to tie up, creating the world's largest trading platform as the exchange industry enters a period of global consolidation.

Under the terms of the deal, Deutsche Boerse shareholders will own 60% of the newly merged company, with NYSE shareholders controlling 40%. One Deutsche Boerse share will be exchanged for one share of the new company's stock, while each share of NYSE Euronext will be swapped for 0.47 share of the new company stock.

"The Increasing globalization and interconnectedness of capital markets, and the rapidly growing presence of alternative trading venues that operate with less transparency and far fewer regulatory requirements, will position the new company as a true global player," NYSE Euronext Chief Executive Duncan Niederauer said.

At 1456 GMT, NYSE shares were down 4.1% at $37.83 on the largely anticipated announcement, while Deutsche Boerse shares fell 1.9% to EUR60.14.

Niederauer will be CEO of the new company, while Deutsche Boerse CEO Reto Francioni will be the chairman. In addition to Niederauer and Francioni, 15 directors will join the 17 member, one-tier board.

An executive committee will be led by Niederauer with four members representing each exchange. From Deutsche Boerse, Andreas Preuss will become deputy CEO and president as well as head of derivatives. Gregor Pottmeyer will become chief financial officer, Jeffrey Tessler will lead settlement and custody operations, Frank Gerstenschlaeger will lead the company's market data and analytics operations.

Key board members from NYSE Euronext will include Dominique Cerutti as head of technology services and IT, Lawrence Leibowitz, who will head cash trading and listings and John K. Halvey, who will become general counsel.

Joint headquarters will be located in New York City and Eschborn, near Frankfurt.

The companies didn't provide a name for the new company but said they expect to register a newly formed Netherlands-based holding company, Alpha Beta Netherlands Holding N.V.

Deutsche Boerse and NYSE are expected to postpone announcements on a new name, technology implementation and potential job cuts amid concerns from regulators and politicians on both sides of the Atlantic.

New York Senator Charles Schumer voiced concerns over the weekend that a merger could result in lost influence for NYSE, particularly if a new name for the merged company emphasized Deutsche Boerse's majority ownership. Labor representatives from Deutsche Boerse have also said that a U.S.-based CEO could result in lost jobs and resources for Germany-based staff.

In addition to regulatory approval, sealing the deal will require that a majority of NYSE Euronext shareholders controlling outstanding shares provide approval. Additionally, 75% of Deutsche Boerse shareholders will have to confirm the deal.

Together the two companies will earn 2010 net revenue of EUR4.1 billion and earnings before interest, taxes, depreciation and amortization, or Ebitda, of EUR2.1 billion. The two companies confirmed in a statement.

The deal is expected to result in EUR300 million in annual revenue synergies, achieved after three years. Around 25% of synergies will be achieved after one year, with 50% acquired after two years. The deal will immediately lift adjusted earnings of both companies.

Around 25% of estimated cost savings will be reached after one year, rising to 50% in the year after and achieving full synergies three years after merging, the companies said.

The companies expect to complete the merger by the end of 2011.

Additional details are expected at a Deutsche Boerse news conference beginning at 1600 GMT Tuesday.

Deutsche Boerse and NYSE Euronext--the parent of the Big Board--revealed last week that they were in advanced discussions on a potential combination. The deal creates the world's biggest exchange group for trading stocks and futures contracts, with a commanding position in stock listings and market technology.

The merger was seen as driven by the potential to create a globally leading derivatives franchise, combining heavily traded fixed-income and equity-index futures across the exchanges' European markets. Smaller and more nimble platforms geared toward automated share-trading have cut into the profitability of both NYSE Euronext's and Deustche Boerse's stock markets.

NYSE Euronext last week said its fourth-quarter profit declined by one-fifth from a year earlier, hurt by a dollar that strengthened against the euro and by weak trading volume in both the U.S. and Europe.

 
   -By Nathan Becker, Dow Jones Newswires; 212-416-2855; nathan.becker@dowjones.com; 

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