ICE to acquire Nyse Euronext for $8.2bn; LSE/LCH.Clearnet talks rumble on

20 December 2012 | 6601 views | 1 NYSE 2

IntercontinentalExchange (ICE) has agreed an $8.2 billion deal to acquire Nyse Euronext in a stock-and-cash transaction.

The overall mix of the $8.2 billion of merger consideration being paid by ICE is approximately 67% shares and 33% cash. The transaction value of $33.12 represents a 37.7% premium over NYSE Euronext's closing share price on Wednesday.

Investors see plenty of upsides in a takeover by ICE, which would create a powerhouse in cross-asset trading and reduce Nyse Euronext's reliance on stagnating, hyper-competitive equity markets. Nyse's share of trading on stocks listed on the Big Board has shrunk from 82% to just 21% in a fiercely competitive market.

For ICE, a tie-up with Nyse Euronext will give the energy trading bourse a leg-up into the expanding market for over-the-counter derivatives contracts and the geographical outreach to take on the Chicago Mercantile Exchange.

The two companies have already inked an agreement for Nyse Liffe to move its clearing operations to ICE Clear Europe. The implications of the deal for Nyse Liffe's plans to move its clearing from LCH.Clearnet to a newly-constructed inhouse CCP by June 2013 have not been spelled out.

The combined company is expected to save up to $450 million through cost synergies in the second full year post closing. ICE has successfully integrated more than a dozen acquisitions in the last decade.

An earlier bid by ICE to take over Nyse Euronext in tandem with Nasdaq OMX was nixed by the US Justice Department on anti-competitive grounds. Observers see no similar objections being raised to a straight merger, with Nasdaq OMX removed from the equation.

The transaction is expected to close in the second half of 2013, subject to regulatory approvals.

Elsewhere, the London Stock Exchange's bid to renegotiate the terms of its majority takeover of LCH.Clearnet is reaching a crucial phase. The LSE is believed to have tabled a revised 13 euros a share offer for its 60% stake in the clearer, lopping 33% off the asking price initially agreed back in April.

The deal is an important one for the LSE as it seeks to stake a claim in the future market for central counterparty clearing in the derivatives industry. However, the forthcoming imposition of higher collateral charges on clearing houses by European regulators has rendered the original agreement with LCH.Clearnet uneconomic.

Comments: (1)

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Gary Wright - BISS Research - London | 20 December, 2012, 16:06

This is a major step towards consolidating the market infrastructures and has wide market changing possibilities. Not least it makes the LCH price agreed with the LSE far too high. However it also makes it very important that this deal is completed for both parties. I dont expect this deal to be last and more consolidation will happen in 2013. If not expect the major global banks to start to enter the post trade clearing game

This sector is rarely boring and over a decade has seen swings and roundabouts as strategies change and markets evolve and struggle and political and regulatory pressure. More to come and what fun!

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