Nasdaq OMX and IntercontinentalExchange are poised to go hostile in their bid for NYSE Euronext after shareholders ratcheted up pressure on the Big Board parent to get a better deal.
Nasdaq OMX Group Inc and IntercontinentalExchange Inc are expected to soon take their $11.1 billion bid directly to NYSE's shareholders through a tender offer, two sources familiar with the situation said.
The move is seen as the next logical step for Nasdaq and ICE after being rebuffed twice by NYSE, which has refused to open talks on their offer. NYSE favors its existing $10.1 billion deal with Germany's Deutsche Boerse AG.
A direct appeal to shareholders through a tender offer would ramp up the pressure that NYSE is already under, although they also have defenses to keep Nasdaq and ICE at bay.
NYSE, for instance, can institute a poison pill, which would thwart the hostile bid by making it more difficult and expensive for the rivals to buy its shares.
In signs the Big Board is facing growing dissent over its strategy of just saying no, shareholders at its annual meeting on Thursday approved two proposals that the board had advised against, and directors who were up for election got fewer votes than before.
Investors at the packed meeting in New York urged NYSE management and board to start talks with Nasdaq and ICE, while also asking them to press Deutsche Boerse to sweeten its deal.
This merger is grossly unfair to the shareholders, said Kenneth Steiner, who owns about 1,000 NYSE Euronext shares. I voted against the directors. I believe they should be removed and replaced with those who can get us the appropriate value for our shares.
The NYSE board and managers who launched a charm offensive to woo shareholders stuck to their belief that the Deutsche Boerse deal was the better way to go.
Earlier on Thursday, NYSE CEO Duncan Niederauer said he would close the perceived value gap between the deals. The Nasdaq/ICE offer is about 10 percent higher than the Deutsche Boerse deal.
Niederauer, a fierce rival of Nasdaq's Robert Greifeld, promised that a combined NYSE-Deutsche Boerse would have much higher earnings, diverse revenues and would cut costs.
With shareholders pushing for a sweeter deal from the German exchange, Niederauer said, We would hate to miss out on an accelerating opportunity because we just got a touch too greedy on the ratio.
NYSE Chairman Jan-Michiel Hessels called the unsolicited offer from Nasdaq and ICE illusory and fraught with unacceptable execution risk.
We believe their request for a meeting is a tactic principally designed to be disruptive to our combination and therefore we see no basis for which to meet with them, Hessels said.
NYSE's board took just 10 days to snub Nasdaq this month, dismissing its bid as strategically unattractive and warning of heavy U.S. job losses from such a deal.
Eight of nine institutional investors polled by Reuters this week said NYSE Euronext should at least sit down with Nasdaq and ICE.
On Thursday, shareholders approved a proposal that gives investors with just 10 percent of the company's shares the power to call special meetings -- a move that could make it easier for Nasdaq and ICE to pursue their counter-bid if it drags on after a July shareholder vote.
NYSE said it would likely take 12 months to adopt the proposal.
The shareholders reelected the directors with an average of 80 percent support, according to preliminary results. Last year, the directors got more than 90 percent support.
Separately, Deutsche Boerse said it has no plans to sweeten its offer, but highlighted possible cost savings of at least 500 million euros ($742 million) from the deal.
The target is 100 million euros higher than the initial estimates. Half of the additional savings would come from the technology unit.
Deutsche Boerse and NYSE Euronext also reported strong first-quarter results, topping analyst expectations.
NYSE earned 68 cents a share, excluding items, topping the 60 cents Wall Street expected.
Separately, CME Group Inc said its first-quarter profit rose 22 percent, beating expectations, as the biggest U.S. futures exchange operator handled record trading in energy and grains.
(Additional reporting by Ann Saphir in Chicago and Edward Taylor in Frankfurt; editing by Sophie Walker, Jon Loades-Carter, Robert MacMillan and Andre Grenon)