Nasdaq and ICE doubt NYSE-D.Boerse cost savings

By @ibtimes on

Nasdaq OMX Group and IntercontinentalExchange warned NYSE Euronext investors to be highly skeptical of the additional cost savings that the NYSE says will result from its friendly merger with Deutsche Bourse.

Nasdaq and ICE are hoping to thwart the Deutsche Boerse deal, having offered $11.2 billion to buy NYSE after Deutsche Boerse and NYSE agreed to a $9.9 billion merger.

NYSE Euronext Chief Executive Duncan Niederauer raised the estimate of potential cost savings from the Deutsche Boerse deal by about a third, to some 400 million euros ($580 million), a spokesman said on Sunday.

Twice this month, NYSE's board of directors have rejected the bid by Nasdaq and ICE as too risky and lacking value, and backed the German bourse's lower offer on grounds it will produce a better strategic fit.

Nasdaq and ICE said on Monday that the newly found cost savings were not the result of sharpening a pencil, but an unexplained shift in strategy.

The U.S.-based exchange operators also noted that shareholders have not been offered an increase in price.

Niederauer's new estimate puts the cost and revenue benefits in the NYSE Euronext-Deutsche Boerse deal closer to the $740 million in synergies that Nasdaq and ICE see in their rival bid for NYSE.

The struggle for control of the iconic Big Board and the NYSE's handful of bourses across Europe could redraw ownership of many of the world's key stock and futures markets, as a merger frenzy grips the exchange industry.

Also on Monday, Nasdaq and ICE also came under fire from a prominent U.S. lawmaker worried about job losses that would come with their proposed cost cuts.

The impact of the proposed deal on jobs in the New York City area would be a major consideration in judging any potential transaction, U.S. Sen. Charles Schumer of New York wrote in a letter to Nasdaq CEO Robert Greifeld and ICE CEO Jeffrey Sprecher.

Schumer said NYSE officials had privately told him that a merger with Nasdaq and ICE would result in a loss of 1,000 to 1,100 U.S. jobs, including roughly 800 in the New York City area.

When Nasdaq and ICE unveiled their unsolicited bid on April 1, Greifeld did not say how severe the job losses would be, though he said he would keep the NYSE trading floor on Wall Street.

Also on Monday, the U.S. Department of Justice, which will need to sign off on the merger and is reviewing it, asked Nasdaq for more information and documentary material. Justice Department spokeswoman Gina Talamona declined to confirm or comment on the government's second request for information from Nasdaq but said our investigation is ongoing.

The tug-of-war for NYSE Euronext has raised questions about which deal is better for shareholders given the price disparity between the two proposals and the antitrust hurdles that could yet derail each of them.

NYSE shareholders are meeting on Thursday for their annual vote on the company's directors. The shareholder vote on the NYSE-Deutsche Boerse deal is expected on July 7.

NYSE Euronext shares closed regular trading on Monday down 0.7 percent at $38.76 and Nasdaq OMX Group shares ended down 1.1 percent at $27.23.

(Reporting by Lauren Tara LaCapra, Paritosh Bansal and Jonathan Spicer; additional reporting by Jeremy Pelofsky in Washington; Editing by Derek Caney and Matthew Lewis)

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