Deutsche Boerse will wait until bid target NYSE Euronext responds to a rival approach from Nasdaq and Intercontinental Exchange before considering raising its own offer, sources familiar with Boerse's thinking said on Monday.
Late last week Nasdaq and IntercontinentalExchange made a $11.3 billion counterbid for NYSE Euronext , putting pressure on Deutsche Boerse Chief Executive Reto Francioni to respond.
For now, the Frankfurt-based exchange operator is sitting it out, waiting for regulators, rating agencies, shareholders and NYSE Euronext's management to respond to the counteroffer, two people familiar with the matter said.
Rating agencies as well as the NYSE Euronext board have not yet reacted to the offer, so it's far too early to say what Boerse's next move will be, said one of the two sources.
Nasdaq's relatively high levels of debt and anti-trust remain hurdles to any Nasdaq/ICE offer.
The European Union's Internal Markets Commissioner Michel Barnier on Monday signaled support for a Deutsche Boerse deal saying he will seek to ensure that European financial centers stay strong in any merger of exchange operators.
Deutsche Boerse unveiled its $10.2 billion takeover of NYSE Euronext in February -- aiming to form the world's largest exchange operator as part of a wave of tie-ups in the increasingly competitive and global exchange world.
Nasdaq's counterbid, greeted with some skepticism over whether it can succeed, would redraw the world's capital markets so that Americans have a stronger hand than Europeans as exchange operators globally maneuver to come out on top.
Deutsche Boerse could opt to keep its offer at current levels, but runs the risk of losing out, in what would be the second defeat after being forced to abandon a Euronext merger in 2006, after NYSE swooped to clinch the operator of the Paris, Brussels, Amsterdam and Lisbon exchanges.
Or Deutsche Boerse could restructure the existing merger agreement with NYSE Euronext.
But it risks either underselling itself, or completely dominating a deal - something that will meet with political resistance in New York, which fears a loss of influence from a combination with the German exchange operator.
Earlier, in response to a report in German newspaper Die Welt that the exchanges operator would not raise its bid, the spokesman said the company strongly believed a merger of Deutsche Boerse and NYSE Euronext was the best possible combination.
Share in Deutsche Boerse dropped 1.4 percent to 52 euros.
Analysts said the counterbid left Deutsche Boerse looking vulnerable.
If Deutsche Borse intends to be back in the merger they have to raise the price substantially including a potential cash component which would be negative in our view, said DZ Bank analyst Matthias Duerr.
LBBW analyst Martin Peter downgraded Deutsche Boerse to hold from buy on the grounds of uncertainty over whether it would raise its bid.
At the same time, he said, the Nasdaq/ICE offer was still seen as shaky.
It will be hard for Nasdaq to eliminate the existing doubts regarding synergies, leverage, and valuation as well as regulatory and political issues, Peter said.
WestLB and Commerzbank also cut their ratings on Deutsche Boerse.
Deutsche Boerse's deal may have to go through a dramatic overhaul to satisfy European regulators' antitrust concerns and appease U.S. lawmakers resistant to a foreign owner.
Nasdaq and ICE's counterbid dodges those problems but comes with a bunch of fresh ones including Nasdaq's high levels of debt.
Deutsche Boerse could afford to pay more for NYSE than Nasdaq and ICE can if it wants the deal badly enough, according to another source familiar with the matter.
Nasdaq has less capacity to take on debt than other exchanges, putting constraints on how much it can afford to pay.
But upping its offer would make it less easy for Deutsche Boerse to sell a NYSE deal as a merger of equals.
A combination of Nasdaq and NYSE's businesses would create a company with a monopoly on listing U.S. public companies and dwarf other U.S. options markets, which one source close to the Big Board said raises concerns about antitrust issues and the certainty of closing the transaction.
(Reporting by Ludwig Burger and Edward Taylor, writing by Sophie Walker; Editing by Jon Loades-Carter and David Cowell)