Euronext Rebuffs Deutsche Boerse Offer, Favors New York Stock Exchange

European stock-exchange operator Euronext rebuffed an $11 billion takeover proposal from Deutsche Boerse on Tuesday, calling new details of the bid misleading and saying the $10.2 billion offer by the New York Stock Exchange remained more attractive.

In a statement ahead of the European exchange operator's shareholder meeting in Amsterdam, head of group finance Serge Harry said that more specifics of the Deutsche Boerse bid released Tuesday had not changed the company's mind.

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Euronext NV, which runs the Paris, Brussels, Amsterdam and Lisbon exchanges, sits at the center of the current battle for stock market consolidation after the Nasdaq Stock Market Inc. (NDAQ) acquired 25 percent of the London Stock Exchange PLC.

The company said Monday that the NYSE Group Inc.'s (NYX) cash-and-share bid was the "most attractive combination" on the table, but stressed that it would present both proposals to shareholders Tuesday and will not formally recommend a deal until it has heard their views.

Chairman Jan-Michiel Hessels reiterated at the meeting Tuesday that after a brief review of the offers, the boards consider that the NYSE offers the most attractive option.

"Your views as shareholders will be very carefully considered by the board before making a recommendation to shareholders" at a future meeting, he said.

Euronext CEO Jean-Francois Theodore said he and the board advised shareholders not to support an agenda item saying that a merger with Deutsche Boerse AG is in principle the best option.

"I would like to be clear, crystal clear, maybe blunt," he said. "Your vote today is not asking you in any way to choose between one or the other option."

"Your board is only telling you, asking you, advising you, not to deprive yourself of your freedom of choice of the value of the options."

The plan from Deutsche Boerse, which operates the Frankfurt stock exchange, would include 870 million euros ($1.11 billion) in cash for Euronext shareholders — lower than the 2.4 billion euros ($3 billion) cash element of the NYSE offer.

However, Deutsche Boerse's overall offer was worth 76.60 euros ($97.84) per Euronext share at Monday's closing prices — or 10.2 percent above NYSE's bid. Euronext stock would be exchanged for 0.68 Deutsche Boerse shares and 7.72 euros ($9.86) in cash, based on the same closing prices, the German exchange said.

Deutsche Boerse has proposed folding itself and Euronext into a new company based in Frankfurt. Deutsche Boerse shareholders would also receive 11.38 euros ($14.54) cash per share, taking the total cash outlay to about 2 billion euros ($2.6 billion).

"Deutsche Boerse strongly believes that this transaction represents the most attractive combination for shareholders, customers and the financial centers involved," the German exchange said in a statement.

Euronext's Harry said that was "misleading, because the proposal is based on the three-month, volume-weighted moving average prior to the signing of a (merger) agreement."

"This is the same offer we received over the weekend, which was fully considered by the board (Monday)," Euronext's CFO added.

Detailing its offer made last week without financial terms, Deutsche Boerse said the cash payment was designed to introduce debt into the proposed new company and would be split between shareholders in both itself and Euronext.

"Furthermore it is the only option available at this point that accelerates to the further integration of European financial markets within a European regulatory environment," it said.

But the Frankfurt exchange's plan runs the risk of intervention by EU antitrust authorities or the French Finance Ministry, which said Friday that its one-stop trading, clearing and settlement model should not be extended to the rest of Europe. Deutsche Boerse has refused to spin off its derivatives clearing and settlement arms as part of any deal.

Deutsche Boerse also said it had identified savings, including in information technology, and revenue gains of about 300 million euros ($383 million) for the merged company and would pass on about 60 million euros ($77 million) of that to customers.

Euronext has come under heavy pressure to merge with Deutsche Boerse from a group of hedge funds controlling an estimated 20 percent of its capital — many of which also own stakes in the German exchange.

But the NYSE has won Euronext's tentative support for its 8 billion euro ($10.2 billion) offer that the U.S.-based exchange said would create "the world's largest and most liquid global securities marketplace" with combined listings of $27 trillion.

The combination would allow the NYSE to enter futures trading as well as European stocks, while straddling more time zones than any other exchange operator.

"This is consistent with our strategic objectives of both expanding geographically into Europe and expanding our product mix into derivatives," NYSE CEO John Thain said.

Atticus Capital LLC, one of the Euronext shareholders that had pushed for a deal with Deutsche Boerse, last week said it was "open-minded" about a merger with NYSE, in a sign that the campaign could wilt. Atticus, which holds about 9 percent of Euronext, declined to comment on the NYSE offer.

Deutsche Boerse shares rose 0.8 percent to 101.90 euros ($130.19) in Frankfurt, while Euronext shares gained 2.9 percent to 69.50 euros ($88.79) in Paris.

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