Deutsche Boerse Seen Focusing On Job Cuts In Nasdaq-ICE Proposal
06 Aprile 2011 - 7:44PM
Dow Jones News
Deutsche Boerse AG (DB1.XE) is expected to highlight the
sensitive issue of potential job cuts to defend its planned merger
with NYSE Euronext (NYX) in the face of a counteroffer from two
rival exchanges, according to people with knowledge of the
matter.
The joint plan outlined last week by IntercontinentalExchange
Inc. (ICE) and Nasdaq OMX Group Inc. (NDAQ), promises far more
synergies from carving up the Big Board operator than the February
deal it agreed with Deutsche Boerse.
The German group, mindful of the political sensitivities of
exchange consolidation on both sides of the Atlantic, believes the
synergy targets could undermine the unsolicited rival proposal.
"It's truly a nuclear bomb from a jobs perspective," said one
person, who was not authorized to discuss the deal publicly.
"You're talking about almost 100% job attrition for NYSE, not just
in New York but other European capitals."
ICE and Nasdaq estimate $740 million in combined synergies by
the end of 2014 under their plan, which relies heavily on cost
reductions. Nasdaq would acquire NYSE Euronext's cash equities and
options business--as well as its fast-growing technology arm--with
ICE taking the Liffe derivatives unit.
The partners have painted their plan as rescuing U.S. capital
markets from a declining global presence as well as providing
assurances about the global role of London and Paris.
Exchange trading is a scale business, and industry consolidation
has focused on pushing more trades through existing platforms. NYSE
Euronext and Deutsche Boerse have already cut staff and overhead
independently over the past two years, and their February pact
outlined $400 million in cost savings within three years.
The combined Deutsche Boerse-NYSE would have about 6,400
employees and several hundred jobs are expected to be cut over
time, mostly in technology fields. Less than 100 positions are seen
eliminated in New York, while Deutsche Boerse's capacity for
massive layoffs is seen muted by Germany's strong unions, which
have voiced concerns about the deal and bridled last year at the
company's move to cut about 100 jobs.
Most reductions are seen occurring around the overlap in the
European derivatives businesses, which are slated to move onto a
single platform. Overall, the combined company would have about
1,950 employees in the U.S. and 4,400 in Europe.
Layoffs are seen being much higher under the plan pushed by
Nasdaq OMX CEO Bob Greifeld--known for his cost-cutting
prowess--and IntercontinentalExchange Inc. (ICE) CEO Jeff Sprecher,
who moved to close trading floors following his acquisitions of
commodities exchanges in London and New York.
"As you cut back to raise your [synergies], you're increasing
the political risk on whether your deal will get approved or
whether regulators and political considerations will kill it," said
Brad Hintz, analyst with Sanford Bernstein. "This is too
politically charged a deal for economics to be the pure
drivers."
Sen. Charles Schumer (D., N.Y.) last week asked ICE and Nasdaq
to detail their plan's potential impact on New York employment, but
the companies are waiting to see first what consideration the NYSE
board gives their proposal, according to a person involved in the
discussions.
Nasdaq, which employs about 2,395 people globally, has privately
argued in recent days that any job cuts would be small compared
with the overall financial-services industry and that the increased
competitiveness of U.S. markets would help job creation across the
country. Overall, Wall Street employed about 169,000 in New York
City, according to data from the New York State Department of
Labor.
Deutsche Boerse also is highlighting the heavy indebtedness of a
combined Nasdaq-NYSE, which would see Nasdaq--its credit currently
rated one notch above junk status--assume an additional $2.1
billion in NYSE debt.
Analysts have said a single listings venue for nearly all U.S.
shares, as promoted by Nasdaq's plan, could carry a black mark if
its parent struggles under a heavy debt load. Greifeld vowed last
week that his proposal would see the parent maintain an
investment-grade rating.
Raymond James Financial this week anticipated a "strong
likelihood" that Nasdaq's debt rating would be downgraded to junk
status if it succeeds in buying NYSE Euronext, which would prompt a
repricing of its existing debt and allow NYSE bondholders to force
Nasdaq to immediately repurchase the Big Board's paper.
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117;
jacob.bunge@dowjones.com
--William Launder and Aaron Lucchetti contributed to this
article.
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