NYSE and Deutsche Boerse merge
The central questions are:
- Why are they merging? What are the benefits to each party?
- What’s the impact to the outside market especially their main competitors?
- Merge details.
- Potential issues.
Sources of information:
I. New York Times (N)
II. Associated press (A)
III. Seeking Alpha (S)
IV. CNBC (C)
- Why are they merging? What are the benefits to each party?
The reduction of the cost.
1.1. Background information: NYSE is the largest stock market but its parent the $9.9 Billion NYSE Euronext is not the largest exchange, smaller than CME (No.1 $20 Billion) and a number of other exchanges. (A)
- What’s the impact to the outside market especially their main competitors?
2.1 Similar events in the same market:
2.1.1 Last week, London and Toronto stock exchanges announced tie-up LSE-TMX $2.9 Billion. (N, A)
2.1.2 In Oct, 2011, SGX, the operator of Singapore stock exchange planned to buy Australia stock exchange. (N)
2.2 Greater access to investments: add in French or Germany company shares. Takes time to materialize. (A)
2.3 Lower trading cost: expected $400 million annual cost savings. (A)
2.4 Rivals’ response: Nasdaq, ICE and CME hold conversation about the possibility of a joint bid and no further progress from there and talks are unlikely to be advanced to a bid. (C)
2.4.1 The most threatened exchange: Nasdaq. It’s difficult for it to make a credible, full financed, overbid for NYSE. (C)
2.4.2 Similar events: A joint hostile that breaks apart an existing deal is virtually heard of. (C)
2.4.3 Practical concern: $340 million breaking up fee. (C)
- Merge details.
3.1 Announce date: Feb 15th. (N)
3.2 Two involving parties: NYSE Euronext and Deutsche Börse. (N)
3.3 Total amount of transaction: $9.53 billion. (N)
3.4 Name issues: Senator Charles E. Schumer of New York want it to have “New York” first in its name. (N)
3.5 Market operation: Deutsche Börse will issue 0.47 of a share for each NYSE Euronext share, a roughly 10 percent premium to the American company’s stock price on Feb. 8. (N)
3.6 Management in combined unit: chairman Mr. Francioni of Deutsche Börse, chief executive Mr. Niederauer of NYSE Euronext. Deutsche Börse hold 10/17 seats on board, 60% of the merged exchange operator’s shares.
3.7 Location: dual headquarters in New York and Frankfurt, incorporated in Netherlands.
3.8 Benefits: expected $400 million annual cost savings.
3.9 Further steps: requires approval by owners representing a majority of NYSE Euronext shares and 75 percent of Deutsche Börse shareholders.
- Potential issues.
4.1 Timing and likelihood of regulatory approvals.
4.2 Synergy realization. For example, data center: (S)
4.2.1 NYSE, two data centers located in NJ and London.
4.2.2 DB, data center outsourced.
4.3 Longer-term management and cultural issues.
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