NYSE, German exchange OK $9.5B merger
The New York Stock Exchange and Germany's largest stock exchange agreed Tuesday to merge operations.
The boards of NYSE Euronext - parent company of the NYSE - and Deutsche Boerse both voted Tuesday morning on the $9.53-billion all-stock deal, which was leaked to the public last week.
Shareholders in the German company are set to hold a 60 percent stake in the merged firm, while NYSE Euronext shareholders will have a 40 percent stake. The new company - its name is said to be under discussion - will be incorporated in the Netherlands and have joint headquarters in Frankfurt and Manhattan. The firms said that together they will be the largest exchange group in the world.
Though each company built its reputation as an exchange for stock trading, a majority of the revenues at the new company will come from other aspects of their operations. "The combined group will earn approximately 37 percent of total revenues in derivatives trading and clearing; 29 percent in cash listings, trading and clearing; 20 percent in settlement and custody; and 14 percent in market data, index and technology services," the firms said in a news release.
The deal still has to be approved by shareholders and regulators, who may balk at the large market share controlled by the new company.
Duncan Niederauer, chief executive of NYSE Euronext - formed when NYSE Group and Euronext merged in 2007 - is set to be the CEO of the new company, while the Deutsche Boerse's chief executive will take the role of chairman.
"The increasing globalization and interconnectedness of capital markets, and the rapidly growing presence of alternative trading venues that operate with less transparency and far fewer regulatory requirements, will position the new company as a true global player well placed to drive the long-term strength and competitiveness of transparent and regulated markets," Niederauer said in a news release.
While the merged entity will list corporations with about $15 trillion in value, more than any other exchange, what may prove more lucrative is ownership of growing venues for trading futures and options, said Rich Repetto, a Manhattan-based analyst at Sandler O'Neill & Partners Lp.