Bid to Buy NYSE Is Gathering Momentum
A fledgling effort to buy the New York Stock Exchange -- and potentially derail its acquisition of an electronic rival -- gained steam Monday as a top Wall Street figure became involved in the campaign launched by Kenneth Langone, a former NYSE director.
John Mack, the former head of Credit Suisse First Boston, joined Langone in a meeting Monday afternoon with senior executives from major Wall Street firms that could lend financial support, including Merrill Lynch & Co. and Lehman Bros. Holdings Inc., according to a person familiar with the matter.
Langone reportedly believes the NYSE’s proposal to buy electronic exchange Archipelago Holdings Inc. is too generous to Archipelago and shortchanges the 1,366 seat holders who own the NYSE.
The plan announced last week would give NYSE members $300,000 each and a 70% stake in the new company, tentatively known as NYSE Group Inc., while giving Archipelago shareholders 30%. Based on Archipelago’s closing price Monday, the deal values the exchange at roughly $3 billion and Archipelago at $1.3 billion. Including the cash component, that works out to about $2.5 million per seat.
The financial executives at Monday’s meeting agreed to analyze the terms of the Archipelago offer and to consider alternatives -- such as a buyout offer -- if they concluded the merger plan was unfair to seat holders, according to a person close to Mack.
The meeting was held at the New York office of Stanley Druckenmiller, a top hedge fund manager who was formerly a lieutenant to Wall Street legend George Soros. Associated Press reported that Druckenmiller is also backing Langone.
A Langone spokesman declined to comment. Neither Mack nor Druckenmiller could be reached for comment.
The Langone effort comes as some seat holders are voicing criticism about the financial terms of the Archipelago plan.
“If I found a Rembrandt in my attic, would I take it out and put it at the curbside tag sale?” said William Higgins, president of the Assn. of New York Stock Exchange Equity Members. “Or would I take it to Christie’s and ask them to open it up to a public bid?”
Charles Urstadt, vice chairman of the Exchange Members Assn., another seat holder group, said his members would welcome a bid from Langone because it might lead to higher prices for their seats.
“It creates an auction atmosphere and that’s good for the members,” he said.
The Archipelago plan and the resulting controversy already appear to have helped seat holders. A seat sold Monday for $2.4 million, up 33% from the last sale on Thursday.
The NYSE defended its plan. “The proposed NYSE-Archipelago merger is a fair proposal that is in the very best interest of the NYSE, our members and the competitive position of U.S. financial markets,” the Big Board said in a statement.
A buyout offer by Langone would seemingly face long odds.
It’s unclear whether investors would want to put money toward preserving the Big Board’s human-based trading system, which many consider to be an anachronism in an age of automated stock trading.
Langone also has had run-ins with regulators and is being sued by New York Atty. Gen. Eliot Spitzer for his role in the pay flap involving former Big Board chief Richard Grasso. Langone chaired the NYSE compensation panel that awarded Grasso much of his controversial $187.5-million package. Langone has defended his actions.
Langone also is said to be irked by the role that Goldman Sachs Group Inc. played in brokering the Archipelago deal. Goldman was the financial advisor to both the NYSE and Archipelago.
A Goldman spokesman defended the firm, saying both the NYSE and Archipelago approved of its role.
