NYX Nyse Euronext

Last week, NYSE Euronext Inc. (NYX) and its merger partner Deutsche Boerse AG agreed to reconcile with the NYSE investors over a special dividend payout of $910 million, which was announced earlier this month.

In February this year, NYSE and Deutsche Boerse had agreed to merge, in a $10 billion deal, based on regulatory approvals. However, a furore rose among the investors of NYSE when the company rejected NASDAQ OMX Group Inc. (NDAQ) and IntercontinentalExchange Inc.’s (ICE) premium-priced joint takeover bid, over and over again, which was finally withdrawn by the parties.

While NYSE had rejected the bid over multiple antitrust concerns that were further validated by the US officials, the investors were dissatisfied with the decision of going ahead with an undervalued all-stock bid of Deutsche Boerse. Consequently, a lawsuit was filed against the company in New York and Delaware state courts and in federal court in the Southern District of New York.

The initiation of lawsuits also threatened to withhold the NYSE shareholders’ from voting for the merger, which is scheduled on July 7, 2011. As a result of these events, on June 17, NYSE and Deutsche Boerse decided to make their deal more lucrative to the investors and announced $910 million in special dividends.

The special dividend will be distributed following the culmination of the merger deal. Accordingly post merger, the Deutsche Boerse holders will receive a special dividend of €2 or $2.87 per share in addition to one share of the new holding company for every current share owned.

On the other hand, NYSE shareholders will receive a special dividend of €0.94 or $1.37 per share, apart from 0.47 share of the new holding company for every share held in NYSE before the merger. The prices for special dividends assume an exchange rate of $1.46 per euro.

Meanwhile, in any case if the special dividend is not approved by the board of the new company, the investors have the choice of confronting this settlement. 

We believe patching up with the investors was crucial for the well being and smooth completion of the merger. A timely reconciliation also saved the companies of additional litigation-related expenses. Currently, both the companies are leaving no room for cancellation of the deal. Deutsche Boerse, which will hold 60% of the merged company, is working toward achieving minimum of 75% shareholder votes in favour of the deal as on July 13.

The Delaware state court is soon expected to give its final approval for the settlement, which would consequently close the investor lawsuits in New York and Delaware state courts. After a long trough, the merger is finally expected to close by the end of this year, following which the merged unit will be the leading exchange operating entity across the US and Europe.

 
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