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Deutsche Boerse sticks with Euronext pursuit

/ Source: The Associated Press

As officials of the New York Stock Exchange and Euronext touted their revolutionary $9.96 billion union, rival bidder Deutsche Boerse AG said it has no intention of abandoning its pursuit of Euronext and its four European stock exchanges.

Issuing a statement even as NYSE Group Inc. CEO John Thain and Chairman Jan-Michiel Hessels held a news conference to explain their deal, Deutsche Boerse reiterated that its bid, which Euronext executives advised shareholders against accepting, was a good offer.

The NYSE agreed Thursday to buy Euronext, which operates the Paris, Amsterdam, Brussels and Lisbon exchanges, for $9.96 billion in cash and stock. Deutsche Boerse has not released terms of its bid, but analysts have estimated it to be worth around $11 billion. It is believe the bid would require the combined company to carry more debt than the NYSE offer.

Deutsche Boerse’s persistence reflected the drive among stock exchanges to consolidate and extend their reach. A marriage between NYSE and Euronext would handle a staggering $2.1 trillion in stock trades each month and boast a market value of about $20 billion.

NYSE and Euronext officials stood by their deal to form NYSE Euronext.

“We are fine with the New York Stock Exchange, we are committed to do this deal,” Hessels said when asked about Deutsche Boerse’s intentions. “We’re obliged to listen to anything that makes sense or adds value.”

“There is no incentive to stay in, we’re free to listen to anything that makes sense. But, again, we have signed and are committed,” said Hessels, who would chair the combined company

Thain, who would remain chief executive of the exchange, denied there would be a bidding war for Euronext. He pointed out that U.S. hedge fund Atticus Capital — a major shareholder in Euronext — continues to back the NYSE deal over Deutsche Boerse’s offer.

“That shareholder is the biggest shareholder of the New York Stock Exchange and is one of the biggest in Euronext,” Thain said. “This is a very significant shareholder who says this transaction makes sense to them. ... We’re not going to speculate on if anything else happens, we’re going to focus on getting this done.”

Atticus controls a roughly 9 percent stake in Euronext, 6 percent in NYSE, and 5 percent in Deutsche Boerse.

Analysts believed it would be hard for Deutsche Boerse to thwart the NYSE-Euronext deal.

“At the moment, Deutsche Boerse is the loser and today is Black Friday for them,” said Wolfgang Gerke, a professor of banking and finance at the University of Nuremberg and Erlangen.

“It’s quite difficult for Deutsche Boerse because they were used to the position of opening doors,” he said. “Now they’re not and a trans-Atlantic platform is more interesting than the continental European platform.”

The NYSE-Euronext deal could turn world markets upside down, spurring mass consolidations, threatening the future of open-outcry trading and perhaps even opening the way for a round-the-clock worldwide exchange. The acquisition would create a single platform where traders could deal in stocks, options, futures, commodities and corporate bonds across two continents — for up to 12 hours daily.

The latest turns in the fight for Euronext are part of a flurry of stock exchange merger proposals that kicked off in March, when the Nasdaq Stock Market Inc. made a $4.5 billion bid for London Stock Exchange PLC. After the offer was rebuffed, the Nasdaq has since acquired more than 25 percent of the LSE, prompting Euronext to end its long-running interest in the British exchange.

Frankfurt-based Deutsche Boerse has failed on several occasions in recent years to acquire the London Stock Exchange, and has said it will look for deals in the United States and Asia if its bid for Euronext collapses.

Analyst Juergen Kurz, of DSW, a German group that represents shareholders, said the tie-up could end up marginalizing the company and reduce its chances of “remaining a really big player.”

“Deutsche Boerse will no longer play the role that it played to date,” he added.

The German government insisted Friday that Deutsche Boerse made “an exceptionally attractive offer,” spokesman Thomas Steg said in Berlin. He said the government considers it more sensible to create alliances of European exchanges so that they could “assert themselves not only in the European market but also in global competition.”

There is a possible problem for the NYSE bid — it appeared little changed from its preliminary offer announced last week, which could turn off some Euronext shareholders who had demanded more concessions.

Under the proposal, each NYSE share would be converted into one share of common stock of the new combined company NYSE Euronext. Holders of Euronext ordinary shares would be offered the right to exchange each of their shares for 0.98 share of NYSE Euronext stock and $27.42 in cash.

Since Euronext operates electronically, many predict the consolidation could spell the end to the traditional floor trading at the NYSE’s lower Manhattan base. The NYSE itself only entered the electronic trading game — and went public — in March after acquiring Archipelago Holdings Inc.

Analysts said private investors in Europe stand to profit from a merger with NYSE, since it would boost the selection of companies available, consolidate redundant computer systems and reduce processing costs for purchasing equities overseas.

“The merger will rationalize the way stocks are bought and exchanged between Europe and the U.S.,” said Pierre Flabbee, an analyst at Keppler Equities in Paris. “Investors in Europe will have more direct access to the American market, with fewer impediments.”

If the deal with NYSE goes through, the exchange will have its group headquarters in New York and European headquarters at Euronext’s base. The board of a combined company would include 11 directors from NYSE and nine from Euronext.

Those numbers could be reworked, however, based on talks Friday between Euronext chief Jean-Francois Theodore and the head of Italy’s Borsa SpA, Massimo Capuano. Italian stock exchange officials said the two were to start alliance talks. That could gain a European board seat for the new NYSE-Euronext, and a 10-10 split between Americans and Europeans.

Common shares of NYSE Euronext would be listed on the New York Stock Exchange and Euronext.