European Union regulators vetoed Deutsche Boerse AG and NYSE Euronext’s plan to create the world’s biggest exchange after concluding the merger would hurt competition.
“Deutsche Boerse and NYSE Euronext have been informed that the European Commission on Wednesday has decided to prohibit their proposed business combination,” the companies said in a statement. “Despite the remedies offered by the companies, the European Commission concluded that the combination would significantly impede effective competition.”
Deutsche Boerse agreed to acquire its New York rival in a deal valued at $9.5 billion when it was announced last February. Since then, the value has plummeted to about $7.3 billion as Deutsche Boerse shares fell. The companies appealed directly to commission President Jose Barroso last month to try to salvage their merger, arguing that an EU ban would harm European exchanges and drive business to other parts of the world.
Antitrust concerns have thwarted other exchange tie-ups around the world. Nasdaq OMX Group Inc and IntercontinentalExchange Inc abandoned an unsolicited bid for NYSE Euronext after the US justice department threatened to sue. Singapore Exchange Ltd’s $8.8 billion bid for ASX Ltd collapsed after Australian Treasurer Wayne Swan said the deal wasn’t in the national interest.
Michel Barnier, the EU’s financial services commissioner, said yesterday that he would seek a debate on Almunia’s proposal to block the deal with the 27-member college who made the ruling. He said he wanted to weigh up “the evolutions” in the financial industry stemming from new regulations.
The merger prohibition is the EU’s fourth since 2004, when it overhauled its rules for reviewing deals.
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“The regulator is there to represent the wishes and desires of the regulated, in this case the customers, the banks and the brokers,” said Peter Randall, who brought competition to Europe as one of the founders of London-based Chi-X Europe Ltd, the region’s biggest alternative trading system. “It doesn’t seem that they want consolidation.”
Randall, who spoke before Wednesday’s announcement, is chief executive officer of Equiduct Systems Ltd, which is seeking to take exchange business from retail brokers.
Deutsche Boerse’s acquisition of NYSE Euronext would have put more than 90 per cent of Europe’s exchange-traded derivatives market and about 30 per cent of stock trading in the hands of one company. Deutsche Boerse’s Eurex is the region’s biggest derivatives exchange, while NYSE’s Liffe is the second largest.
Overlapping businesses
NYSE Euronext and Deutsche Boerse had offered to sell overlapping businesses and give rivals access to post-trade services as they struggled to convince regulators that the merger wouldn’t stifle competition in derivatives and clearing. European Union regulators told the companies in December that the concessions didn’t go far enough, two people familiar with the discussions said.
The exchanges met officials in Brussels to discuss their revised offer, which included capping fees on derivatives trading and clearing for three years, the sale of NYSE’s Liffe single-stock derivatives business, and the licensing of the Eurex trading system to a third party, said the people, who declined to be named because the talks are private.
Antitrust officials investigating the case had previously indicated the exchanges would have to divest an entire derivatives business such as Liffe or Deutsche Boerse’s Eurex, the people said. Chief executive officers of both exchanges said they weren’t prepared to consider that option.
NYSE and Deutsche Boerse also offered to give any buyer the option to access Eurex Clearing for post-trade processing.