NYSE Alters Deal With Archipelago

The New York Stock Exchange on Thursday said it and electronic stock market Archipelago Holdings Inc. had tweaked the terms of their deal to merge, offering NYSE members the chance to cash in early and change the mix of how they receive their funds.

Chief Executive John Thain called the original terms “fair and equitable” but said they were changed to respond to objections by some members, who are known as seat holders.

Some members had complained that the deal undervalued the NYSE compared with Archipelago, and that seat holders were being shortchanged. Three current and one former member filed lawsuits after the deal was announced.

Under the deal announced in April, NYSE members and employees are set to get 70% of the new company, with Archipelago shareholders getting the rest.

Thain noted the rise in the price of an NYSE seat since the deal was announced, from below $1 million to north of $2 million.

He said that at Archipelago’s current share price of $39.40, the value of the combined entity topped $6 billion, giving an implied market value per NYSE seat of about $3.5 million. The last seat sale was for $2.4 million.

Thain said seat holders would be able to vote on the deal later this year. The deal needs approval from a two-thirds majority of the exchange’s 1,366 seat owners who vote. It also needs approval from the Securities and Exchange Commission.

Among the changes announced Thursday, Thain said existing seat holders would be able to change the mix of stock and cash they receive, with the total value to be received remaining the same.

In addition, under the revised deal, members would be restricted from selling shares in the new company for no more than three years, compared with five years under the original proposal, Thain said.

Thain also said that stock worth up to $50 million would be reserved for employees of the combined entity. Thain said he felt “very strongly” that the staff members should own equity. But the $50 million was less than what they would have received under the initial terms.