The New York Stock Exchange, an icon of American capitalism, moved closer to ceding control to a German company on Thursday after investors threw their support behind a $9.4 billion takeover by Deutsche Boerse AG
Now the deal's fate lies across the Atlantic, where the transaction requires approval from 75 percent of Deutsche Boerse shareholders by Wednesday of next week and then must survive a thorny European Commission antitrust review that could run through the rest of the year.
The exchanges have promoted the deal as a merger of equals -- in part because it allows Big Board Chief Executive Duncan Niederauer to run the combined entity. The larger Frankfurt-based bourse, however, would control 10 of 17 board positions, while its shareholders will own roughly 60 percent of a yet-to-be-named Netherlands-based holding company.
The terms failed to put off NYSE Euronext
If roadblocks to the blockbuster deal emerge, they are likely to come from Europe, although Neiderauer suggested on Thursday that the hurdles are surmountable.
I have not met a single Deutsche Boerse shareholder who is not supportive of the transaction, Niederauer said at the shareholder meeting in New York. The challenge, he said, will be in making sure enough investors file the paperwork properly and in time.
Niederauer said so far the tendering process was a little ahead of what he had expected it to be. About 25 percent of shareholders are common to the two companies, and those investors have not tendered their shares yet, he said.
The tie-up between NYSE and the German exchange was announced in February amid a flurry of cross-border deal attempts by exchanges eager to cut costs and diversify in the face of fast-eroding market shares in their traditional stock-trading businesses.
The London Stock Exchange Group Plc
NYSE Euronext itself was the target of an unsolicited counter-bid in April from archrival Nasdaq OMX Group Inc
Competitive concerns over the deal may take center stage in Europe in coming months. EU antitrust regulators are likely to complete the first stage of their review by the end of July or early August, Niederauer said on Thursday. He said he expects to learn the focus of any regulator concerns near the end of that process, which will be followed by a second review.
But, he suggested, regulators will likely not require any major divestitures before approving the deal, noting that any such conditions would be unprecedented.
Niederauer said he still expects the deal to close by the end of the year, likely in December.
A NYSE-Deutsche Boerse combination would produce a behemoth that offers trades in virtually every U.S. and European asset class, with annual trading volume exceeding $20 trillion. It also explains why European antitrust regulators are expected to take a close look at the near lock the company would have on exchange-traded derivatives -- and possibly demand some divestitures or other concessions.
There have been few public critics of the deal in the United States, despite the NYSE's symbolism as a bastion of American capitalism. The exchange was founded in 1792 when share trading began under a buttonwood tree on a block now designated as Wall Street.
To woo votes, Niederauer and his Deutsche Boerse counterpart, Reto Francioni, have been telling shareholders they expect to achieve cost savings from the combination of at least 500 million euros ($715 million), ramped up from an initial projection of 300 million euros ($429 million). They also have promised a special dividend of 2 euros per share ($2.86 per share) after the deal closes.
Under the terms of the deal, Francioni would be chairman of the combined entity.
NYSE shares were up 2.18 percent to $35.11 after the vote results were announced. Deutsche Boerse shares rose 2.35 percent to 54.48 euros.
(Additional reporting by Jonathan Spicer)
(Editing by Jed Horowitz, Andre Grenon, Dave Zimmerman)