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Langone’s Big Board bid seen faltering

Nearly a month has passed since Kenneth Langone, the financier and former New York Stock Exchange director, said he was assembling a consortium of investors to explore a possible bid for the exchange. But some now are asking if the bid has lost momentum.
/ Source: Reuters

Where in the world is Kenneth Langone?

Nearly a month has passed since the financier and former New York Stock Exchange director said he was assembling a consortium of investors to explore a possible bid for the exchange, after the Big Board said it would merge with Archipelago Holdings Inc. and go public.

Since the flurry of initial activity that surrounded the announcement — which included the involvement of former Morgan Stanley President John Mack — Langone’s camp has gone largely silent. The lack of movement has led some market watchers to question whether the bid has either lost momentum, or was designed largely as a publicity attempt.

Jim McCarthy, a spokesman for Langone, said this week that the group was still in the process of assembling an independent valuation of the exchange.

Experts say consortium deals typically take longer because of the number of investors involved, and some are more complex than others. Other contributing factors include whether debt capital will be used, and how much money will be provided by each investor.

But given Langone’s tangled history with the exchange — he is being sued by state regulators for his role as the architect of former NYSE Chairman Richard Grasso’s controversial $193 million pay package — some observers have been skeptical of his intentions.

“Langone has a reputation of drawing attention to himself, and this looks like that’s his primary motivation,” said Benn Steil, a senior fellow and director of international economics at the Council of Foreign Relations in New York. “Had he been serious he would have handled it quietly.”

To bid, or not to bid?
Some NYSE seat holders, unimpressed with the initial terms of the Archipelago deal and restive about the Big Board partnering with an electronic exchange, initially welcomed the idea of a counter-offer.

According to the NYSE’s charter, any deal must be approved by two-thirds of voting members. Under the current terms of the Archipelago deal, owners stand to make up to $2.5 million each.

Langone’s move was based in part on the resentment by some on Wall Street about the multiple roles played by Goldman Sachs, which advised both sides of the transaction and holds an investment stake in Archipelago.

But Langone’s silence has caused some observers of the deal to question whether he was ever serious.

“Frankly, I was disappointed that he didn’t produce anything but some noise,” said one veteran NYSE seat holder who supports the exchange going public, but asked not to be identified because of the ongoing conversations between owners and NYSE management over the terms of the Archipelago deal.

“I would hope that (Langone) was for real, because I would certainly like to see other bids come in. But I don’t know where he’s going,” the person added.

Langone’s bid for the exchange must also be viewed through the prism of his tenure at the NYSE.

Langone was Grasso’s chief defender, and some exchange members are uncomfortable with the idea that a bid by him could pave the way for a return by the former chairman.

“Langone is a bidder for the NYSE, but he’s not exactly a neutral bidder,” said one former executive who also requested anonymity. “He has baggage...and his approach to the NYSE raises eyebrows in a number of corners and in a number of ways.”