NYX Nyse Euronext

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.

Grafico Azioni NYSE Group (NYSE:NYX)
Storico
Da Lug 2024 a Ago 2024

Grafico Azioni NYSE Group (NYSE:NYX)
Storico
Da Ago 2023 a Ago 2024