NYX Nyse Euronext

The Deutsche Boerse-NYSE Euronext Inc. (NYX) merger recently overcame its second major snag, winning 80% Deutsche Boerse shareholder vote in favor of the deal. The transaction will give Deutsche Boerse a 60% ownership in the combined entity, while NYSE Euronext Chief Executive Officer, Duncan Niederauer, will be at the helm of its operations. 

Last week, the merger overcame its first obstacle when about 65% of NYSE Euronext’s shareholders consented to the deal. This development came after both the companies reconciled with NYSE investors last month, offering 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, which the parties finally withdrew.

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 to progress with an undervalued all-stock bid of Deutsche Boerse. Consequently, a lawsuit was filed against the company at New York and Delaware state courts and at the federal court in the Southern District of New York.

Post merger, Deutsche Boerse shareholders 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 merged 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 may challenge the decision.

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  and clearing, 29% from cash listings, trading and clearing, 20% from settlement and custody, and 14% from market data, index and 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

The ongoing probe by the European Union Commission (EUC) is the third important hurdle that the Deutsche Boerse-NYSE Euronext merger is confronted with.The past three quarters witnessed a plethora of acquisition and merger activities but many of these failed to materialize due to regulatory snag. This clearly explains the significance of regulatory processes.

The EUC fears that the merger provides ample scope for a monopolistic model for the future, primarily with the fusion of NYSE Liffe and Deutsche Boerse’s Eurex derivative markets. Hence, the EUC has already informed that the deal could be delayed owing to 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 selling of some assets, in order to solve competition concerns.

Moreover, the deal could also be blocked if the involved companies fail to solve such concerns; however, such a possibility is rare.

Overall, owing to such issues, the antitrust commission in EUC has taken up a multi-phase regulatory probe, for which the deal is unlikely to be completed before 2011 end.

 
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