Nasdaq OMX Group Inc Chief Executive Officer Robert Greifeld says his plan to acquire NYSE Euronext offers $300 million more in cost savings than Deutsche Boerse AG’s proposal.
Nasdaq OMX, the second-largest US bourse operator, and IntercontinentalExchange Inc made an unsolicited bid of about $11.3 billion for the owner of the New York Stock Exchange yesterday, saying they will eliminate about $740 million in expenses in three years. That’s 74 per cent more than Frankfurt-based Deutsche Boerse predicted in its all-stock agreement with NYSE Euronext CEO Duncan Niederauer in February.
Greifeld, who joined Nasdaq OMX in 2003, is betting overlap between the American companies will give him an advantage as the merged entity tries to squeeze out extra profit. The chief executive has done it before, lowering costs at New York-based Nasdaq OMX to 59 per cent of revenue last year from 68 per cent in 2006 while buying more than a dozen companies.
“No one has been better than Nasdaq at acquiring and efficiently integrating companies,” said Justin Schack, managing director in charge of market structure analysis at Rosenblatt Securities Inc in New York. “Bob is very, very disciplined and very focused on managing things as efficiently as possible. In past acquisitions, they were able to under- promise and over-deliver on the cost savings, and as a result they got a ton of credibility from the market.”
Nasdaq OMX had been left out of exchange mergers since October, when Singapore Exchange Ltd offered A$8.35 billion ($8.66 billion) for Sydney-based ASX Ltd. In addition to the Deutsche Boerse offer in February, London Stock Exchange Group Plc said that month that it would buy Canada’s TMX Group Inc for £1.94 billion ($3.13 billion). The announced value of the deals totalled about $21 billion, Bloomberg data show.
Nasdaq OMX shares rose 9.3 per cent, the most since March 2009, to $28.23 at 4 pm in New York yesterday. NYSE Euronext surged 13 per cent to $39.60, the highest price since October 2008. That’s 12 per cent higher than the Deutsche Boerse offer, valued at $35.44 as of 5:20 pm. The Nasdaq OMX bid, which has yet to be approved by its shareholders, comes to $42.92 a share, up from $42.50 when announced.
Greifeld offered about $2.8 billion in stock and $2.1 billion in cash and said Nasdaq OMX would assume $2.1 billion in NYSE Euronext debt in exchange for NYSE’s US listings, equity and options businesses. ICE, based in Atlanta, offered $4.7 billion of its stock and $1.7 billion in cash, assuming no NYSE Euronext debt, for a total of about $6.3 billion for the Liffe futures unit.
Nasdaq OMX’s share of the cost savings would be about $610 million, according to a presentation yesterday. The company also projected $20 million in revenue synergies and said it would generate $90 million in savings for customers, such as company issuers, trading firms and investors.
“This is a conservative estimate” based on public information and could be revised higher if Nasdaq OMX gains access to NYSE Euronext’s private financial data, Greifeld said.
