Germany's Deutsche Boerse is in advanced talks to buy NYSE Euronext, and the London Stock Exchange has agreed to buy Canadian stock market operator TMX, as exchanges globally look for ways to boost their markets and cut costs.
Together, Deutsche Boerse and NYSE Euronext would dominate exchange trading in continental Europe. The companies said they could cut costs by 300 million euros ($408.7 million) a year.
The combined group would have headquarters in New York and Frankfurt, with Deutsche Boerse shareholders holding about 60 percent of the combined company and NYSE shareholders holding the rest. The companies disclosed their talks on Wednesday.
Earlier in the day, LSE said it would buy TMX, forming the world's fourth-largest exchange and a top center for trading mining and energy shares, with $4.1 trillion of stock changing hands a year. The exchanges are looking to regain market share lost to upstart electronic trading platforms.
Other exchanges could face similar pressure to merge, analysts said.
These mergers don't take place on a one-off basis; they come in clusters, said Thomas Caldwell, chief executive of Caldwell Securities Ltd in Toronto, which invests in exchanges.
One exchange seen as a possible acquisition target is CBOE Holdings Inc, experts said. Options exchanges have been growing fast, while stock market trading volume has been moving away from traditional exchanges and toward electronic trading venues like privately held BATS Global Markets. CBOE shares rose 9.6 percent to $26.88.
The next logical step would be for the Nasdaq or CME Group or even the ICE to take out CBOE Holdings Inc, said Jon Najarian, a co-founder of web information site Optionmonster.com in Chicago.
LSE shares rose 9 percent after the TMX deal was announced, which is unusual; acquirers' share prices often fall. The rising price signals LSE could be getting a good deal, which in turn could mean another buyer might offer a higher price for TMX.
But some bankers dismissed such speculation.
You would need to put a cash bid on the table and a premium, which might require cuts at TMX, and the Canadian regulators would not like that one bit, one banker said.
If the combination survives likely political opposition in Canada, a group will emerge with a market value of 4.3 billion pounds ($6.9 billion) based on Tuesday's prices, with LSE shareholders holding 55 percent.
(Writing by Douwe Miedema and Dan Wilchins; additional reporting by Victoria Howley and Sudip Kar-Gupta; Editing by Andrew Callus, David Cowell, John Wallace)
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