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Exchanges in flux: CME takes 'organic' route as Deutsche Börse and Nyse Euronext agree deal

15 February 2011  |  8929 views  |  1 Globe

Deutsche Börse and Nyse Euronext have reached agreement on a merger deal, creating the world's biggest exchange operator.

The pair confirmed they were in talks last week and have now settled on the tie-up details, with Deutsche Börse shareholders owning 60% of the merged entity. Each share of Deutsche Boerse stock will be exchanged for one in the new company, with Nyse Euronext stock worth 0.47.

The new group will be incorporated in the Netherlands and dual headquartered in New York and Frankfurt. Nyse Euronext's Duncan Niederauer will become CEO and lead an executive committee comprising of four people from each company.

In a statement, the companies claim a merger will "strengthen Frankfurt and New York as key financial centres, while benefiting Paris and London as well as Luxembourg" and will offer clients global scale, product innovation, operational and capital efficiencies, and an enhanced range of technology and market information.

Each of the group's national exchanges, including those in Amsterdam, Brussels, and Lisbon, will keep its name in its local market and all exchanges will continue to operate under local regulatory frameworks and supervision.

However, the statement does not make reference to what the combined group will be called, an issue that has exercised New York Senator Charles Schumer, who has insisted Nyse must come first in any name.

The combined group will have 2010 combined net revenues of $5.4 billion. Based on 2010 net revenues, the combined group will earn approximately 37% in derivatives trading and clearing, 29% in cash listings, trading and clearing, 20% in settlement and custody, and 14% in market data, index and technology services.

The pair also claim they can make annual cost savings of around $400 million by combining, principally from information technology, clearing, and market operations.

Reto Francioni, CEO, Deutsche Boerse, says: "Shareholders of both companies will benefit from unique growth opportunities and synergies. Clients will have unparalleled access to markets, products, information, world-class technology, clearing services and settlement - globally and around the clock."

Niederauer adds: "The increasing globalisation and interconnectedness of capital markets, and the rapidly growing presence of alternative trading venues that operate with less transparency and far fewer regulatory requirements, will position the new company as a true global player well placed to drive the long-term strength and competitiveness of transparent and regulated markets."

Meanwhile, CME Group, recently subject to speculation that it could make a last ditch bid to win Nyse Euronext from under the nose of its German rival, has issued a statement claiming it remains "committed to creating shareholder value by executing our strategy to pursue organic growth opportunities".

Says the Chicago outfit: "Like other industry participants, we will continue to monitor ongoing developments in the global exchange sector and the implications of those developments on our long-term growth strategy."

With mergers high on the agenda following last week's news about the London Stock Exchange's proposed deal with Canada's TMX, another player to rule themselves out of any deal is the Swiss stock exchange. In an interview with Bloomberg, SIX Group CEO Urs Rueegsegger insisted it is "not available".

Separately, Singapore Exchange and Australia's ASX have moved to calm regulatory concerns about their proposed merger. SGX has agreed to increase Australian representation on the combined entity's board to placate Australian watchdogs and gain clearance.

Comments: (1)

A Finextra member
A Finextra member | 15 February, 2011, 16:26

On the face of it this looks an exciting deal but there are real complications also. Big can also be complex and this merged Exchange is just about as complex as it comes. The technology and German market structures has always been a deal breaker in the past. So whats changed today? The NYSE Euronext has been overcoming their merger problems but these were easy in comparison to having the German Exchange included.

Does the market really need or want this deal? Arguably the answer is no

Troubled waters are ahead in this merger    

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