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Euronext investors back merger with NYSE

Euronext shareholders on Tuesday approved overwhelmingly a $14-billion plan to merge the multinational European exchange operator with the New York Stock Exchange and form the first transatlantic bourse.
/ Source: Reuters

Euronext shareholders on Tuesday approved overwhelmingly a $14-billion plan to merge the multinational European exchange operator with the New York Stock Exchange and form the first transatlantic bourse.

Around 98.2 percent of shareholders present or represented at the meeting backed the merger, a margin that surprised even Euronext Chief Executive Jean-Francois Theodore after several shareholders voiced opposition to the deal in recent weeks.

“I was quite positively surprised. Winning by this margin after all these months of battle,” a smiling Theodore told Reuters after the meeting ended. “This is an important step that we’ve made, but it (the deal) won’t be completed before March.”

The deal’s attractive financial terms and, for some shareholders, diminished concern about the risk of U.S. regulatory spillover into European markets, explained the stronger-than-expected majority, analysts said.

At Tuesday’s meeting 64.9 percent of Euronext shareholders were physically present or had voted by proxy.

The approval removes one of the final hurdles to the creation of a global exchange after a two-year industry battle to consolidate to cut costs and increase execution speed.

It also comes as the London Stock Exchange urged its shareholders to reject a $5.3 billion hostile bid from U.S. exchange Nasdaq, sending Nasdaq shares to their lowest level in over a month.

NYSE spokesman Rich Adamonis said the group welcomed the approval by Euronext shareholders. NYSE shareholders will vote on Wednesday and are widely expected to also approve the deal, which is key to the U.S. group’s strategy to diversify its product base and geographic reach.

Euronext Chairman Jan-Michiel Hessels said a tender offer could be expected within some days or weeks, after definitive approvals by European market regulators and the Dutch Finance Ministry, and approvals by the U.S. Securities and Exchange Commission and French authorities.

The combined NYSE Euronext entity will be a market mammoth which Theodore said would be at the forefront of further industry consolidation.

“Euronext has been a pioneer in European consolidation. Now we are going global. We are now interested in Asia but this may come a bit later and the European part of NYSE Euronext will hopefully continue to integrate other European markets,” he said

Theodore said the door was “still open” for Borsa Italiana to join NYSE Euronext. Euronext and the Milan stock exchange operator held talks about a possible alliance earlier this year.

Euronext committed to merge with NYSE Group in June after rebuffing a rival offer from Deutsche Boerse, incurring the wrath of some shareholders as well as top European politicians who favored a pan-European combination.

The extraordinary general meeting proved relatively quiet, with very few shareholders physically present, and only a handful of those present asking questions.

Some critics spoke out. “We have here (with the NYSE deal) what looks like the end of shareholder democracy,” said a representative of Proxinvest.

Proxinvest and another shareholder said regulatory and governance issues remained. But others like Dutch asset managers Robeco, which had initially opposed the deal, joined other key shareholders in saying it would back the deal.

U.S. hedge fund Atticus, Euronext’s largest shareholder, said on Monday the deal would reward investors.

“After the newest measures (by the Dutch finance ministry and European regulators) the critics were also won for the deal” Rabo Securities analyst Thomas Nagtegaal said.

The authorities that regulate Euronext markets and the Dutch Finance Ministry have given preliminary approval for the merger pending clarification of some issues.

Euronext’s Theodore told shareholders before the vote that both companies were “very confident” they could meet revenue and savings synergies of $375 million, mainly by rationalizing information and technology systems and platforms.