IE 11 is not supported. For an optimal experience visit our site on another browser.

Deutsche Boerse abandons Euronext bid

Deutsche Boerse AG abandoned its more than $10.26 billion bid to merge with Euronext NV on Wednesday, calling the goal unachievable and dealing a blow to its hope of building a pan-European stock exchange.
/ Source: The Associated Press

Deutsche Boerse AG abandoned its more than $10.26 billion bid to merge with Euronext NV on Wednesday, calling the goal unachievable and dealing a blow to its hope of building a pan-European stock exchange.

But the decision cleared the way for the NYSE Group Inc. to complete its acquisition of Euronext and form the world's first trans-Atlantic stock exchange.

Deutsche Boerse said its plans to try to merge with the operator — which has repeatedly rebuffed the offer in favor of a bid now worth more than $13 billion from NYSE, owner of the New York Stock Exchange — would not create the value its shareholders desired.

"We are convinced that, in our industry, mergers can only be successful with the support of both management teams and the industry," said Deutsche Boerse Chief Executive Reto Francioni. "We have invested time and commitment, but it is part of our responsibility to recognize when further effort doesn't make sense."

He told reporters that Euronext, the operator of the Paris, Amsterdam, Brussels and Lisbon exchanges, repeatedly shot down proposals from Deutsche Boerse.

"There is no sense in continuing to work in the direction toward a merger with Euronext," Francioni said. "All of our efforts in this regard ... they were all rejected in one way or another or simply fell on deaf ears."

Francioni did not rule out further involvement in expansion or consolidation of the industry, both at home and abroad.

He said the decision means Deutsche Boerse is now "free to go in all the markets," adding that it was looking outside Europe. He did not elaborate.

"External growth is an option but not a necessity for Deutsche Boerse. Based on our very strong position in the industry, we will continue our successful organic growth path," Francioni said. "Nevertheless, we expect to take an active role in the consolidation process in our industry in Europe and beyond."

In a conference call with reporters, Francioni was asked if the failure meant he would be forced to step down — as his predecessor, Werner Seifert, was following two failed bids to acquire the London Stock Exchange.

"I see no reason to step down," Francioni said.

Deutsche Boerse also withdrew its request for the European Commission to clear the deal.

The decision came as seven of Europe's biggest investment banks said they were working on their own stock-trading platform aimed at competing with the London Stock Exchange.

The banks involved include Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, Goldman Sachs Group Inc., Merrill Lynch & Co., Morgan Stanley and UBS AG.

Deutsche Boerse had faced numerous hurdles in its quest to form its own pan-European exchange _ something that politicians including French President Jacques Chirac and German Chancellor Angela Merkel, had supported.

Even Jean-Claude Trichet, president of the European Central Bank, touted the advantage of such a tie-up, noting that it would serve as a counterbalance to the New York Stock Exchange and the Nasdaq Stock Market.

The Nasdaq, after seeing its own bid for the London Stock Exchange rebuffed, has built up a 25.1 percent stake that makes it the biggest shareholder in Europe's largest bourse.

Alois Rhiel, the economics minister of the German state of Hesse, where Deutsche Boerse is based, said the failure of the tie-up with Euronext was "regrettable in that the hoped-for European consolidation will not come."

However, he added that it freed Deutsche Boerse to concentrate "on its own strengths," such as derivatives trading.

NYSE's cash and stock offer for Euronext originally was worth some $8 billion, but its value has swelled to more than $13 billion given gains in NYSE's stock price since then.

NYSE now should avoid the risk of a bidding war that could have forced it to raise its offer.

Francioni said Deutsche Boerse was "not interested in joining the Euronext/NYSE merger," adding that "I am skeptical" about whether that merger would succeed.

"Only 20 percent of our bottom line is cash market, and NYSE/Euronext is about the cash market," Francioni said. "We also have derivatives, in which we have (the bigger business) than Euronext."

The New York exchange has forecast that the deal, which needs shareholder approval, will close in the first quarter of 2007. Euronext is scheduled to hold a general meeting in December to vote on the NYSE offer.

Francioni said Deutsche Boerse's "doors remain open to new talks with the Italian stock exchange Borsa Italiana." He also said an open-door policy applies to the Swiss Exchange, which he once headed.

Last week Deutsche Boerse said that plans to form the basis of a pan-European exchange with Borsa Italiana were halted. Neither company has identified the issues over which they disagreed.

Germany's most prominent banker, Deutsche Bank CEO Josef Ackermann, said that global tie-ups have advantages "but the first step should be European."

"It seems to me that we in Europe are prepared to accept American partners rather than seek a European solution with all of our strength," Ackermann was quoted as telling the Berlin newspaper Tagesspiegel.