NYSE Euronext directors again rebuffed an $11.3 billion takeover offer from Nasdaq OMX Group Inc. and IntercontinentalExchange Inc, saying a proposed breakup fee to allay antitrust concerns doesn’t change their commitment to merging with Deutsche Boerse AG.
Nasdaq OMX and ICE’s pledge to pay $350 million to the New York Stock Exchange owners should their bid be blocked by competition authorities didn’t improve the offer enough, the board said in a statement today on the company’s website. Directors have twice deemed the Nasdaq OMX-ICE proposal inadequate, saying April 10 that “execution risk” and the threat of rising debt and layoffs were too high.
“This proposal is substantially the same as what was previously rejected,” NYSE Euronext chairman Jan-Michiel Hessels said in the release. “Consequently, our view has not changed. This proposal does not provide compelling value, has unacceptable execution risk and is therefore not in the best interests of NYSE Euronext shareholders.”
Nasdaq OMX Chief Executive Officer Robert Greifeld and ICE CEO Jeffrey Sprecher said this week that they are meeting with NYSE Euronext shareholders as they try to head off the $9.53 billion Deutsche Boerse agreement. Their offer, valued at $42.73 per NYSE Euronext share as of 11:09 am in New York, is priced about 14 per cent higher than the bid from Deutsche Boerse.
Share Prices
Frank De Maria, a spokesman for Nasdaq OMX, didn’t immediately comment. Kelly Loeffler, a spokeswoman for ICE, didn’t immediately respond to an e-mail request for comment. Andreas von Brevern, a spokesman for Deutsche Boerse in Frankfurt, declined to comment.
NYSE Euronext shares fell 0.2 per cent to $39.01 at 11:09 am, bringing the gain since Nasdaq OMX-ICE first announced an offer to 11 per cent.
Nasdaq OMX rose 0.2 per cent to $27.38, while ICE advanced 0.1 per cent to $120.80.
Deutsche Boerse increase 0.8 per cent to 54.95 euros.
NYSE’s merger announcement with the Frankfurt-based company on Feb. 15 helped propel a wave of exchange consolidation that has seen about $20 billion of deals announced in less than six months. NYSE Euronext CEO Duncan Niederauer considers the Deutsche Boerse proposal a merger of equals that fits the New York-based company’s long-term strategy of increasing revenue through expansion.
‘Need to Improve’
“Nasdaq OMX and ICE will need to improve several elements of their unsolicited bid for NYSE Euronext before the NYSE board of directors will agree to meet with them to discuss their proposal,” Patrick O’Shaughnessy, an exchange analyst in Chiago for Raymond James Financial Inc., wrote in a note to investors yesterday. “Most importantly, we believe NYSE views the Nasdaq- ICE bid as significantly undervaluing the firm.”
Nasdaq OMX had been left out of the consolidation wave since October, when Singapore Exchange Ltd. offered A$8.35 billion ($8.97 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. The ASX deal was blocked by the Australian government.
Greifeld says his plan to purchase NYSE Euronext offers at least 27 per cent more in cost savings and revenue synergies than Deutsche Boerse’s proposal. New York-based Nasdaq OMX, the second-largest U.S. bourse operator, and ICE in Atlanta say they will generate about $740 million in both expense cuts and synergies in three years. The Deutsche Boerse deal estimates 400 million euros ($582.36 million).
Termination Fee
NYSE Euronext will likely continue to favor Deutsche Boerse unless Greifeld raises the termination fee and secures larger and longer-lasting financing commitments, according to Raymond James ‘ O’Shaughnessy. He rates NYSE Euronext a “strong buy.”
Greifeld offered about $2.78 billion in stock and $2.12 billion in cash and said Nasdaq OMX would assume $2.07 billion in NYSE Euronext debt in exchange for the U.S. listings, equity and options businesses. ICE offered $4.7 billion of its stock and $1.65 billion in cash, assuming no NYSE Euronext debt. The companies said on April 19 that they received the $3.8 billion needed in commitment letters from lenders.
Both groups have been meeting with NYSE Euronext shareholders since the April 10 rejection in an effort to win support for their offer. Antitrust approval has been “the one thing and one thing only” that shareholders are concerned about with the Nasdaq OMX-ICE offer, Greifeld said yesterday on a conference call. He said he has been meeting with the antitrust division of the U.S. Justice Department to provide information on the industry and customers to contact.
‘Pushing Ahead’
“Nasdaq is pushing ahead with the regulators,” Daniel Fannon, a San Francisco-based analyst at Jeffries & Co., wrote in a note to investors yesterday. “It has been informally providing information to the Department of Justice and is expecting to formally engage in a two-way dialogue approximately six weeks from now.”
Nasdaq OMX owns 12 equity and options markets in the U.S. and Europe including the Nasdaq Stock Market, Nasdaq Options Market and venues in Sweden, Denmark, Finland, Iceland, Estonia, Latvia and Lithuania.
With the Liffe futures markets, ICE would move to fourth from 14th in terms of global derivatives volume. ICE specializes in energy and commodities trading, with its only offering in financial products coming from currencies and equity indexes at its New York-based ICE Futures U.S. exchange. CME Group Inc. of Chicago is its bigger rival.
Combining NYSE Euronext and Deutsche Boerse would create an exchange company with operations in 11 countries generating 5.6 billion euros in sales and 869 million euros in earnings annually. Earnings before interest and taxes for the combined exchange would have been 1.1 billion euros for the year ending Dec. 31.
