NYSE Seen Readying Merger Bid
NYSE Group Inc. is close to making a bid to merge with Euronext, Europe’s second-largest stock exchange, to create a transatlantic securities market, people with knowledge of the situation said.
The owner of the New York Stock Exchange may offer cash and stock for Euronext as early as today, said the sources, who declined to be identified before the bid was announced.
NYSE Group Chief Executive John Thain is accelerating the Big Board’s push overseas after Nasdaq Stock Market Inc. built a 25% stake in the London Stock Exchange, thwarting any rival takeover bids for Europe’s biggest equity market.
A deal would unite the 214-year-old New York exchange with bourses in Paris, Amsterdam, Brussels and Lisbon, creating the prospect of a single market bridging two continents.
“I’ve thought all along that Euronext was Mr. Thain’s likeliest move,” said Randolph Post, who runs floor broker R.H. Post Inc. and owns shares of NYSE Group because he was a member of the exchange before it became a public company in March. “I think it’s the natural move.”
Euronext CEO Jean-Francois Theodore now has to choose between NYSE Group and Deutsche Boerse, which proposed a merger Friday. The operator of the Frankfurt stock exchange said a combination with Euronext would generate significant savings and enable the companies to return cash to shareholders.
Thain would lead a merged NYSE Group-Euronext and Theodore would have a senior role in Europe, according to a person with knowledge of the talks.
Although the combined exchange would be based in the U.S., activities in Europe would be overseen by Euronext’s current regulators, the source said.
Together, NYSE Group and Paris-based Euronext would handle about $2.1 trillion in trades a month, twice as much as Nasdaq, and boast a market value of more than $20 billion. Chicago Mercantile Exchange Holdings Inc. currently is the most valuable securities market, with shares valued at $15.6 billion.
Whichever partner he chooses, Theodore will usher in the next phase of consolidation among exchanges as investors demand lower trading costs and more ways to buy and sell securities across time zones.
For New York-based NYSE Group, which is locked in a battle for U.S. market share with Nasdaq, Euronext would extend its reach into Europe and give Thain a foothold in the faster-growing and more profitable business of futures trading. Euronext acquired Liffe Holdings in 2001 to become the continent’s second-largest futures exchange.
With NYSE Group as a partner, Euronext could draw more listings from companies that want to tap U.S. investors without having to comply with America’s tougher and costlier regulations.
“The most attractive feature in Euronext is that they have much less competition than the NYSE does in the U.S.,” said Richard Herr, an analyst at Keefe Bruyette & Woods Inc. in New York, who has a “market perform” rating on NYSE. “I think that’s the biggest draw.”
