NYX Nyse Euronext

Last week, NYSE Euronext Inc. (NYX) achieved its first milestone on receiving a green light for its merger with Deutsche Boerse.

Preliminary results showed that about 96% of the shares voted, or 65% of NYSE Euronext’s shareholders, gave their consent for the merger in the US.

The result comes after the companies had reconciled with NYSE investors last month with a special dividend payout of $910 million, to be distributed upon the culmination of the merger deal.

In February this year, NYSE Euronext and Deutsche Boerse agreed to merge in a $10 billion deal, based on regulatory approvals. However, a furor 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Inc. (NDAQ) and IntercontinentalExchange Inc.’s (ICE) premium-priced joint takeover bid, repeatedly, which was finally withdrawn by the parties.

While NYSE Euronext had rejected the bid over multiple antitrust concerns that were further validated by the US officials, investors were dissatisfied with the decision of progressing 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.

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 Euronext 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 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.

Strongest Exchange Merger Ever

The NYSE Euronext-Deutsche Boerse merger is expected to be the most solid business combination in the history of the global stock exchanges. Based on 2010 net revenues, the prospective merger will earn approximately 37% of total revenue from derivatives trading & clearing, 29% in cash listings, trading & clearing, 20% in settlement & custody and 14% in market data, index & technology services.

Moreover, the prospective merger is expected to generate full run-rate cost synergies of €400 million ($580 million) along with €150 million ($218 million) in revenue synergies.

Next European Leap Tough

Although the parties to merge have been doing their best in luring investors, the fate of the merger still dangles over whether Deutsche Boerse will be able to achieve a minimum of 75% shareholder votes to seek approval. 

Furthermore, the ongoing probe from the European Union Commission (EUC) could create a snag in the process. The EUC fears that the merger provides ample scope for a monopolistic model in the future, primarily with the fusion of NYSE Liffe and Deutsche Boerse’s Eurex derivative markets. Hence, the EUC had already made it very clear that the deal could undergo a delay on grounds of regulatory hurdles arising out of extensive reviewing.

The EUC antitrust commission is deeply probing into the matter and expects to come out with a viable solution that could include clearing an operation or setting conditions on the selling of some assets, in order to solve competition concerns.

Additionally, a blockage of the deal is also possible, if the companies involved do not commit to solve these concerns, although such a scenario is an unusual one. While a roar of merger and acquisition activities took place in the past three quarters, many   never saw light due to the regulatory snags, which also explain the significance of the regulatory processes.

Overall, as a result of these issues, the antitrust commission in EUC has taken up a multi-phase regulatory probe due to which the deal is not expected to be completed before the end of this year.

 
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NYSE EURONEXT (NYX): Free Stock Analysis Report
 
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