Duncan Niederauer's wish for NYSE Euronext's takeover by Deutsche Boerse AG to be a merger of equals may be coming true — at the expense of shareholders in the Frankfurt-based exchange.
Nasdaq OMX Group Inc and IntercontinentalExchange Inc's unsolicited recent bid for NYSE Euronext valued the operator of the New York Stock Exchange at $42.50 (Dh155.97) a share, topping a February offer from Deutsche Boerse by almost 20 per cent. Without committing any cash, the German exchange could be forced to surrender as much as 45 per cent, up from about 40 per cent, of the combined entity to NYSE Euronext's owners to trump the Nasdaq OMX-ICE bid, according to data compiled by Bloomberg and Capstone Global Markets LLC.
While a bidding contest would help Niederauer, NYSE Euronext's chief executive officer, recoup money for investors that lost more than 40 per cent since the exchange went public in 2006, Deutsche Boerse's all-stock offer has already cost the German exchange's owners $1.4 billion since it was announced. Now, they face giving up even more equity if their managers counter Nasdaq OMX and ICE, which may push Deutsche Boerse to bid as much as $46 a share, the data show.
Right thing
"If Deutsche Boerse were to engage in a bidding war, their shareholders will likely come out with the short end of the stick," said Michael Wong, a Chicago-based analyst at Morningstar Inc. "NYSE shareholders would be the ultimate beneficiaries of the bidding war, with the acquirers being saddled with the winner's curse."
NYSE Euronext is studying the Nasdaq OMX-ICE bid, according to a letter from Niederauer, 51, to employees contained in a filing with the Securities and Exchange Commission last week.
"NYSE Euronext has always been committed to our shareholders, and our board will consider the new proposal and do the right thing for our shareholders," he wrote. "In the meantime, we remain fully committed to our previously announced deal with Deutsche Boerse."
Deutsche Boerse's board isn't currently considering raising its bid, according to a person with direct knowledge of the matter who spoke on condition of anonymity because the deliberations are private.
Frank Herkenhoff, a spokesman for Deutsche Boerse, didn't respond to two telephone messages. The company's offer for NYSE Euronext is "the best possible combination for both shareholder groups and the stakeholders of the companies," Deutsche Boerse said in a statement last week.
Last week's offer from Nasdaq OMX's Robert Greifeld, 53, and ICE CEO Jeff Sprecher, 56, lifted New York-based NYSE Euronext 13 per cent to $39.60 on April 1. Nasdaq OMX rose 9.3 per cent to $28.23 for the biggest gain since March 2009, while Deutsche Boerse fell 1.4 per cent to €52.81 (Dh193).
The German exchange, led by 55-year-old Reto Francioni, declined 14 per cent from February 14, the day before it and NYSE Euronext announced their deal, through last week. The slump lowered the value of its all-stock offer to $35.44, or 11 per cent less than NYSE Euronext's closing price last week. NYSE Euronext fell 1.6 per cent to $38.98 in New York, while Nasdaq OMX retreated 2.8 per cent to $27.44. ICE slipped 0.7 per cent to $118.90.
Deutsche Boerse offered 0.47 of its own stock for each NYSE Euronext share in a deal currently valued at $9.3 billion to create the world's largest exchange operator with venues in the US and Europe.
At the time the deal was announced, Niederauer said on a conference call it was a "merger" with Deutsche Boerse, rather than an acquisition by the German exchange. "I don't know how many more times we can say that," Niederauer said.
Last week, New York-based Nasdaq OMX and ICE of Atlanta made a cash-and-stock offer that valued the 219-year-old exchange operator at about $11.3 billion, Bloomberg data show.
NYSE Euronext owners will get 0.4069 Nasdaq OMX share, 0.1436 ICE share and $14.24 a share in cash, valuing the transaction at $42.50 on March 31. The offer is now worth about $42.92 a share, the data show.
Options markets
ICE would purchase NYSE Euronext's Liffe futures markets, while Nasdaq OMX would keep its US options markets. The deal would give Nasdaq OMX a monopoly on listing companies in the US, the world's largest capital market.
Nasdaq OMX, the second-largest US bourse operator, and ICE said they will eliminate about $740 million in expenses in three years. That's 74 per cent more than Deutsche Boerse predicted in its agreement.
