While it is admirable that the Nasdaq and ICE are doing their best to avoid going obsolete in a world in which exchanges no longer matter, the question of just how credible the market considers an offer which has a financing component accounting for 33% of the transaction funding ($3.8 billion), is very suspect. After all what prevents private equity firm XYZ to come up with a 100% debt funded overbiad thanks to a "highly confident" (also known as "highly conflicted") letter from Goldman that it can raise the debt. In this case we have debt underwriting "titans" Bank of America and Wells
Fargo underwriting the $3.8 billion. In other words, this deal has the same probability of happening as the Fed has of sustaining the market without downticks for the next 3 months.
NASDAQ OMX Group and IntercontinentalExchange Propose Superior Transaction to Acquire NYSE Euronext for $42.50 Per Share, 19% Premium to Deutsche Boerse Proposal
- Creates a leading global exchange in equities,
options, listings and exchange related technology to compete in the
increasingly competitive global exchange market
- Establishes a leading transatlantic derivatives platform that would promote continued competition in Europe and the U.S.
- Represents a superior proposal to the Deutsche Boerse takeover proposal
greater long-term value for stockholders by putting existing businesses
under managements recognized for integration capabilities and
- Strengthens U.S. and European cash equities competitive position for raising capital and creating jobs
- Strengthens ability of regulators to oversee markets and reduces market fragmentation and flash-crash scenarios
NASDAQ OMX (Nasdaq:NDAQ - News) and IntercontinentalExchange (NYSE:ICE - News) today announced that they have made a joint proposal to acquire NYSE Euronext (NYSE:NYX - News) for $42.50 in cash and stock per NYSE Euronext share, or approximately $11.3 billion, based on the respective NASDAQ OMX and ICE closing share prices as of March 31, 2011.
The proposal, delivered today in a letter to the Board of Directors of
NYSE Euronext, represents a 19 percent premium over the price proposed
by Deutsche Boerse, based on Deutsche Boerse's closing share price as of
March 31, 2011, and a 27 percent premium over NYSE Euronext's unaffected stock price on February 8, 2011, the day prior to NYSE Euronext's statement that they were in discussions with Deutsche Boerse regarding a transaction.
Under the terms of the proposed acquisition, NYSE Euronext stockholders would receive $14.24 in cash, plus 0.4069 shares of NASDAQ OMX common stock and 0.1436 shares of ICE common stock for each NYSE Euronext share.
part of the proposal, ICE would purchase NYSE Euronext's derivatives
businesses, and NASDAQ OMX would retain NYSE Euronext's remaining
businesses, including the NYSE Euronext stock exchanges in New York, Paris, Brussels, Amsterdam and Lisbon,
as well as the U.S. options business. A combination of NASDAQ OMX and
NYSE Euronext would merge the trading, listings, options and market
technology businesses of the two companies to create a leading
international exchange, headquartered in New York City,
with a geographic footprint in sixteen countries and best-in-class
technology expertise that is used in over 60 markets internationally.
ICE and NASDAQ OMX will continue to operate as separate businesses
throughout the proposed transaction, as well as after its completion.
Chief Executive Officer of NASDAQ OMX, said: "Our industry is
undergoing a period of historic change. During the last five years more
than 90 percent of the top 100 global listings chose not to list in the
U.S., depriving U.S. investors of the opportunity to easily invest and
trade in these companies. The combination of the two leading U.S.
exchanges delivers an opportunity to build a global exchange platform
that has the scale and growth potential to benefit investors, issuers
and other market participants. We believe it would increase
transparency and liquidity in U.S. markets and create jobs as new
companies raise capital. For Europe, it strengthens the equity markets
by creating a new, truly pan-European equity trading platform and
solidifies Paris and London
as premier financial hubs. Given that our proposal is clearly a
superior proposal, we hope that NYSE Euronext's Board will recognize
this opportunity as well as the benefits for NYSE Euronext's employees
Jeffrey C. Sprecher,
Chairman and Chief Executive Officer of ICE, said: "Given the dynamics
in derivatives markets today, the pace of innovation and the need for
competition, we are well positioned to bring more value to stockholders
by ensuring that Liffe participates in the growth opportunities in our
space. In addition to expanding our clearing capabilities to interest
rates, we would enable increased competition in the U.S., where interest
rates futures are dominated by one exchange with approximately 95
percent market share. And, in Europe,
we would offer an attractive solution to preventing that same business
from being dominated by a single competitor while preserving global
innovation around additional risk management services."
acquisition of NYSE Euronext's European futures markets, Liffe, Liffe
U.S., and the over-the-counter clearing business, NYPC, would leverage
its existing leading derivatives markets across futures and
over-the-counter markets and clearing houses in the U.S. and Europe.
combined NASDAQ OMX and NYSE Euronext would have leadership positions
across all major business lines, including a world-class cash trading
business in U.S. and European equities and a preeminent U.S. options
business. Together, NASDAQ OMX and NYSE Euronext would strengthen the
international competitive position of the U.S. at a time when companies
and investors are increasingly being drawn to other financial centers:
1995, listings on U.S. exchanges have contracted from 8,000 to 5,000
while listings on non-U.S. exchanges grew from 23,000 to 40,000
2010, the U.S. generated only 16 percent of capital raised worldwide
and attracted the listing of only 1 of the 10 largest global IPOs (GM)
unified U.S. equities market would ensure that the U.S. is better able
to compete globally in a rapidly changing international market for
equity trading and capital-raising. A unified technology platform would
also lower firms' and investors' trading costs and provide increased
liquidity and transparency, while maintaining continued U.S. regulatory
oversight of the capital markets to protect investors.
ICE's acquisition would create a strong global competitor in listed derivatives markets and central counterparty clearing:
- Creates a leading exchange operator with $1.8 billion in combined revenues
ICE's existing global derivatives markets, technology and clearing
houses to achieve meaningful synergies, while supporting the development
of competitors to dominant US and European exchanges
- Capitalizes on ICE's ability to innovate and grow markets through new product development, clearing and post-trade services
NYSE Euronext stockholders would receive $14.24
in cash, plus 0.4069 shares of NASDAQ OMX common stock and 0.1436
shares of ICE common stock for each share of NYSE Euronext common stock.
NASDAQ OMX and ICE each have significant experience integrating
exchange businesses and have proven track records of realizing
synergies and creating stockholder value on an absolute and relative
basis within the exchange sector. Overall, the combined companies would
feature highly complementary lines of business with significant synergy
opportunities. This would lead to meaningful value creation for the
combined companies' stockholders, with an expected $740 million in total net synergies fully realized by the end of the third year following the closing of the transaction.
combined NASDAQ OMX/NYSE Euronext would provide accretion to
stockholders 12-18 months following the close of the transaction and
double digit accretion soon after the 12-18 month period. It would also
deliver strong pro forma cash flow generation to invest in the business
and service debt. ICE's acquisition would also be solidly accretive to
ICE stockholders in year two and would leave ICE with substantial
NASDAQ OMX and ICE would finance the cash portion of the acquisition purchase price through cash on hand and a combined $3.8 billion
financing commitment. Both firms have received strong support from a
group of leading institutions, including Bank of America and Wells
Fargo, which together would be prepared to arrange fully committed
financing required to complete the transaction. The repayment of debt
would be financed by the strong cash flows of the combined companies.
Steps to Completion
OMX and ICE believe that the proposed combination would satisfy the
required regulatory approvals in all jurisdictions. NASDAQ OMX and ICE
believe that they can secure E.U. competition clearance in contrast to
the expectation of a deep and extended probe for the proposed Deutsche
The NASDAQ OMX/ICE proposal requires approval
from the majority of NASDAQ OMX and ICE stockholders, versus the
requirement of a 75% acceptance level of the exchange offer by Deutsche
Boerse's shareholders. Both proposals will require approval of a
majority of NYSE Euronext stockholders.
OMX has engaged Bank of America Merrill Lynch and Evercore Group L.L.C.
as financial advisors and Shearman & Sterling LLP as legal counsel
for this transaction. ICE has engaged Lazard, Broadhaven Capital
Partners, LLC and BMO Capital Markets Corp. as financial advisors and
Sullivan & Cromwell LLP as legal counsel for this transaction.