The proposed merger of the owner of the New York Stock Exchange and Germany's Deutsche Börse headed toward collapse Tuesday after European antitrust regulators urged rejection of the deal.
A regulatory ruling on the deal would cap a frantic year of attempted consolidation among exchanges that has mostly been unsuccessful. Would-be partners have faced resistance based on a combination of nationalist sentiment, antitrust concerns and other pressures.
The European Union competition authority recommended that EU commissioners rule against the tie-up, according to a senior European Union official. The recommendation, which hasn't been made public, cited the potential combined power of Deutsche Börse and NYSE Euronext over the trading of exchange-listed derivatives, including futures and options, the official said.
The $17 billion proposed combination of NYSE Euronext and Deutsche Börse, inked last February, was a high-water mark in the wave of consolidation activity. It promised to create the world's largest platform for share listings and a dominant player in European stock and futures trading.
A collapse of the deal would be a disappointment for the two companies, which have said the merger would help consolidate more European trading under one roof and position the company to partner up with fast-growing markets in Asia. However, both NYSE and Deutsche Börse have insisted they would be able to thrive on their own if the deal foundered.
The deal passed muster subject to minimal conditions with U.S. antitrust officials last month, but European regulators have fixated on the companies' combined market share in European futures and options trading, where together their markets are estimated to make up more than 90% of all exchange trading.
The companies have heavily promoted the deal as making securities trading more efficient for all types of investors. They have argued, among other things, that the exchanges face serious competition from over-the-counter markets.
They have vowed not to spin off either company's futures exchange—a possibility that EU regulators had raised—saying that doing so would undermine the strategic goals of the deal.
Representatives of Deutsche Börse and NYSE Euronext declined to comment on the recommendation, saying that neither company had received notice of it. A spokeswoman for the European Union antitrust division declined to comment.
Executives of both exchange groups will meet Wednesday morning in New York to discuss ongoing issues related to the merger in a pre-scheduled meeting, according to a person familiar with the matter.
The deal could still happen. Neither firm plans to walk away until the 27-person European Commission has its say, according to people familiar with the matter. The two exchange operators have been focusing on persuading the commissioners, who are expected to meet to discuss the deal on Feb. 1 with a final decision required by Feb. 9.
Commissioners have broken with EU competition authorities in the past, including Oracle Corp.'s 2010 acquisition of Sun Microsystems. But only about 10% of mergers that undergo an in-depth EU review survive a recommended block by antitrust examiners, according to research from BMO Capital Markets.
NYSE Euronext shares closed 4.6% higher Tuesday at $27.79 after reports of the competition authority's recommendation. Deutsche Börse's shares rallied 4.9% to settle at €42.01. Uncertainty over the deal's outcome has weighed on both stocks.
News of the recommendation was earlier reported by the Financial Times and Fox Business.
Failure would represent a missed chance to forge a European competitor to the CME Group, which currently dominates U.S. trading of futures, contracts that allow investors to manage risk related to the movement of stock indexes, interest rates and commodities.
Last year, some proposed tie-ups came undone. In April, Australia rejected the Singapore Exchange Ltd.'s proposed acquisition of the Australian exchange parent ASX Ltd. over fears that Australia could lose control over key trading services.
A deal also struck last February between London Stock Exchange Group PLC and TMX Group Inc., which operates the Toronto Stock Exchange, also fell apart last year in the face of a rival bid by a consortium of banks that sought to keep Canadian ownership of the company.
It would also be the second failed deal aimed at ownership of the New York Stock Exchange. U.S. antitrust officials in May signaled they would oppose a rival bid for NYSE Euronext put forth by Nasdaq OMX Group Inc. and the futures exchange operator IntercontinentalExchange Inc.
A collapse of the NYSE deal would be another disappointment in the mergers and acquisitions market, which had a lackluster performance last year after this deal, among others, raised hopes for a busy run that ultimately didn't materialize.
read more: Olympus Wealth Management
No comments:
Post a Comment