NYX Nyse Euronext

Proxy advisory firm ISS Proxy Services recommended NYSE Euronext (NYX) shareholders vote in favor of the Big Board owner's planned merger with Deutsche Boerse AG (DB1.XE, DBOEF) ahead of a key shareholder decision on the deal July 7.

The support of ISS, alongside a similar endorsement from proxy service Glass Lewis, ensuring votes from financial institutions that closely follow the companies' recommendations in key shareholder actions.

"On a pro forma basis, the deal will create the world leader in derivatives, capital raising markets, and capital markets infrastructure services," representatives of ISS wrote in a report dated Friday.

NYSE Euronext shareholders are slated to vote on the combination with Deutsche Boerse, agreed in mid-February, at a special meeting on July 7--about a week before Deutsche Boerse shares are due to be tendered in favor of the deal.

Support from ISS and Glass Lewis brings further momentum behind a transaction that had been in doubt as recently as last month, when a rival bid for NYSE Euronext (NYX) was being aggressively pursued by IntercontinentalExchange Inc. (ICE) and Nasdaq OMX Group Inc. (NDAQ), which aimed to split the company in two and streamline operations to make the pieces more profitable.

In mid-May, U.S. regulators blocked that proposal on grounds that combining Nasdaq's business with NYSE would create a monopoly.

"The proxy advisors' opinions would've been much more interesting when there were competing bids for the NYSE," said Ed Ditmire, an analyst with Macquarie Securities. "At this point it becomes a vote on whether or not the NYSE is better alone or in conjunction with Deutsche Boerse, and there it's a broad consensus that the company is better off being a well-rounded exchange leader."

In its report, ISS noted the synergies seen arising from the Deutsche Boerse-NYSE deal. While the one-day premium was "low relative to normal acquisitions," it topped recent mergers-of-equals deals, "including those among exchange operators."

NYSE Euronext and Deutsche Boerse have from the start termed their deal a merger of equals, despite the larger size of the German exchange company.

ISS said that NYSE shareholders would get "significant board and management representation" with seven of 17 board seats and the company's chief executive, Duncan Niederauer, slated for the CEO role in the combined exchange group. It has not yet been named.

Shares in NYSE Euronext recently were 2.3% higher at $32.60. Deutsche Boerse shares were 0.7% higher at EUR50.53 in electronic trade.

Separately Monday, Deutsche Boerse secured a deal to acquire the business of Kingsbury International Ltd., which compiles the Chicago Business Barometer, a monthly snapshot of economic conditions previously known as the Chicago purchasing managers index.

Deutsche Boerse put the deal's price in the "single-digit million range" in U.S. dollars, a figure that includes a performance-related payment.

The move comes as exchanges seek to own more of the indexes and indicators that influence and underlie financial markets. Deutsche Boerse, alongside Swiss exchange company SIX Group, in late 2009 took ownership of European stock-index supplier Stoxx Ltd. from Dow Jones & Co. Inc., a unit of News Corp. (NWS) and publisher of this newswire.

A similar deal in early 2010 brought the acquisition of the Dow Jones indexes group by Chicago-based futures exchange company CME Group Inc. (CME), which trades contracts linked to the Dow Jones Industrial Average.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

--The Paris Bureau contributed to this article.

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