Deutsche Boerse, NYSE agree to merge

The NYSE Euronext (NYSE: NYX) and Frankfurt’s Deutsche Boerse have entered into an agreement to merge in a $10-billion transaction that is expected to result in the world's biggest trading vehicle for stocks and derivatives.

Under terms of the transaction, each share of Deutsche Boerse stock will be exchanged for one share of the new company stock and each share of NYSE Euronext stock will be exchanged for 0.47 of a share of the new company stock

At closing, current Deutsche Boerse stockholders will own 60 percent of the combined entity, with the remaining 40 percent to be held by the existing NYSE Euronext shareholders.

According to a joint statement, the merged company will have combined revenue of $5.4 billion, making it the largest exchange by revenue.

Based on 2010 net revenues, the combined group will earn approximately 37 percent of total revenues in derivatives trading & clearing, 29 percent in cash listings, trading & clearing, 20 percent in settlement & custody, and 14 percent in market data, index & technology services.

This transaction is a catalyst for the development of a global capital markets community, delivering the best, most transparent and innovative services for clients and issuers, wherever they are, said NYSE Euronext CEO Duncan Niederauer in the statement.

The merger is part of a wave of consolidations among stock exchanges around the globe.

Niederauer will be CEO of the merged company; while Deutsche Boerse’s current CEO Reto Francioni will become its chairman.

Under terms of the merger, a Dutch holding company will be formed and the corporation will be dually-headquartered in Frankfurt and New York.

The companies did not say what the new company will be named.

Reuters reported that Democratic New York Senator Charles Schumer has insisted that the merged entity must have the name “NYSE” come first before “Deutsche Boerse.”

Some may say 'What's in a name?' but I say, 'A lot,' Schumer said. “The New York Stock Exchange is a symbol of national prestige, and its brand must not suffer under this merger.

The proposed merger remains subject to approval by regulators on both sides of the Atlantic. There appears to be some political opposition to the deal in the U.S.

Newt Gingrich, the former House Speaker, said that if the NYSE became majority owned by a foreign corporation it would be fundamental blow to the US.

New York-are politicians, including New York City Mayor Michael Bloomberg seem more supportive.
The transaction is expected to close at the end of 2011.