NEW YORK – The New York Stock Exchange, seeking to beat rival Nasdaq Stock Market Inc. in the race to become the first trans-Atlantic stock market, offered $10.2 billion in cash and shares Monday for European exchange operator Euronext NV, which declared the bid to be the best option on the table.
NYSE Group Inc. said its purchase of Euronext, which runs the Paris, Brussels, Amsterdam and Lisbon exchanges, would create "the world's largest and most liquid global securities marketplace" with combined listings of $27 trillion. The combined company, worth $21 billion, would be called NYSE Euronext.
The acquisition would allow the NYSE Group to enter into futures and derivatives trading, as well as European stock trading. Combined with its current electronic options trading, the NYSE would be able to deal in stocks, options, futures, commodities and corporate bonds on two continents, up to 12 hours a day — a broad mix that could appeal to major institutional investors as a one-stop trading platform.
Euronext, which holds its annual shareholders meeting Tuesday, issued a statement after its board meeting Monday saying "the transaction with NYSE currently offers the most attractive combination," but it stopped short of a formal recommendation to shareholders. Shareholders will be asked for their views on both proposals before management makes a formal recommendation, the company said.
The offer comes amid global efforts to consolidate exchanges that began in earnest March 30, when The Nasdaq Stock Market Inc. made a $4.5 billion bid for the London Stock Exchange. The Nasdaq, which was rebuffed, has since acquired more than 25 percent of the LSE, prompting Euronext to call off its long-running interest in the British exchange. The Nasdaq's moves have also pressured the newly public NYSE to find a European partner.
Under the 8 billion euro ($10.2 billion) NYSE 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 0.980 shares of NYSE Euronext stock and 21.32 euros ($27.22) in cash. Based on the NYSE's closing price Friday of $64.50, that values each Euronext share at 70.80 euros ($90.39) — below the Friday close of 74.60 euros ($95.24).
NYSE Chief Executive John Thain said the NYSE would most likely have to issue its own bonds, borrowing at least some of the $3 billion necessary for Euronext shareholders. The NYSE Group currently has about $650 million in cash available. Thain said the exchange operator would be able to completely pay off any debt within three years.
Euronext said that over the weekend, it received further details of Deutsche Boerse's proposal made Friday, which had not contained specific financial terms. DB clarified that the value of its offer would be based on the two groups' average share price over the three months leading up to the closure of a deal. At Friday's closing prices, the offer would have been worth about 64 euros ($82) per Euronext share.
Deutsche Boerse issued a statement Monday denying a report that it would consider an all-share offer valuing Euronext at about 90 euros ($115) a share, but said it remains in contact with Euronext.
Deutsche Boerse AG shares fell 8.5 percent to close at 101.30 euros ($129.48) in Frankfurt before the Euronext statement was issued. Euronext shares dropped 9.5 percent to euro67.55 (US$86.34) in Paris, while in New York, NYSE shares fell 2.6 percent to $62.83.
According to terms proposed by the NYSE, the company would have its group headquarters at the NYSE's current base in New York and European headquarters at Euronext's base. The chairman of the combined company would be current Euronext Chairman Jan-Michiel Hessels, while NYSE Group Chief Executive John Thain would continue as CEO. The board of a combined company would include 11 directors from NYSE and nine from Euronext.
"NYSE Euronext will be the world's most liquid and truly global financial marketplace, offering unparalleled benefits for investors and issuers in the United States, Europe and across the globe," Thain said.
Each of the companies' markets would come under the jurisdiction of local regulators — a move that seemed aimed at addressing concerns that European exchanges would have to comply with stricter U.S. market rules. NYSE Euronext common stock would be listed on the New York Stock Exchange and Euronext.
The NYSE said the proposed combination would result in cost savings of $375 million, saying that would create substantial value for all shareholders.
The transaction terms also assume Euronext will pay to its shareholders its ordinary dividend of 1 euro ($1.28) per share this year and its previously announced extraordinary dividend of 3 euros ($3.83) per share.
The NYSE's move comes less than three months after it concluded its purchase of the former Archipelago Holdings Inc., an all-electronic stock market, and transformed itself from a not-for-profit into a publicly traded company. Even prior to the March 7 start of trading in NYSE Group stock, Thain had said NYSE Group would look for acquisitions abroad.
Thain said there was no plans to do away with the NYSE's specialist system, in which human auctioneers help facilitate the buying and selling of stocks. However, Thain noted that while Euronext's exchanges make use of specialists, they do so electronically. The NYSE is the only major stock exchange left in the world which humans physically interact. While Thain said he remained committed to the specialist system, he did not say whether those specialists would move to electronic trading.