NYSE Settles Lawsuit Over Archipelago Deal

The New York Stock Exchange agreed Tuesday to an independent financial review of its proposed $6-billion acquisition of electronic rival Archipelago Holdings Inc., settling a lawsuit brought by a group of dissident seat owners and allowing a vote on the deal to proceed.

If approved, the purchase would make the NYSE a publicly traded company.

The independent financial advisor, to be chosen by the dissidents and the NYSE, will report to the exchange’s 1,366 seat owners no later than five days before they vote on the deal. A vote by seat owners and Archipelago shareholders is set for Dec. 6.

In return, lead plaintiff William Higgins and his group, which represent ownership of 10 seats on the NYSE, agreed to drop their suit to derail the acquisition, allowing the vote to go forward. They also agreed to no longer disparage the deal.

New York state Supreme Court Justice Charles Ramos approved the settlement, which came after two days of testimony in a hearing on the suit.

Higgins, who had initially pushed for a renegotiation of the entire deal, said he was happy with the settlement.

“We got everything we came here for,” Higgins told reporters at the court. “I want people to be able to make an informed decision about this deal.”

NYSE Chief Executive John Thain said in a statement that he was pleased that the exchange’s members would be allowed to vote as planned.

Higgins and his co-plaintiffs had contended that the proposed acquisition was unfair to NYSE seat holders because it undervalued the exchange. They were challenging Goldman Sachs Group Inc.’s role in the deal, contending that the investment firm had a conflict of interest because it represented both sides and held a 15% stake in Archipelago.

But now that the settlement has been reached, Higgins said he was dropping his case regardless of the outcome of the independent assessment.

“You can’t stop people from voting on a bad deal,” Higgins said. He said he would wait until the independent report came out before deciding whether to vote for or against the purchase.

Higgins also had objected to the split of equity between the two companies, with NYSE seat holders getting 70% of the combined company and Archipelago shareholders receiving 30%. Those terms apparently remain intact as part of the settlement.

The NYSE announced its purchase of Archipelago on April 20, a move that would give the exchange a badly needed technology infusion to complement its traditional floor-trading operations. The deal also would convert the not-for-profit NYSE to a for-profit, shareholder-owned corporation.

Archipelago shares, which lost 86 cents to $48.58 in regular trading, jumped to $51 after hours, on news of the settlement. The stock has soared 132% this year on expectations that the sale would be completed.