NYSE Euronext’s board of directors has unanimously voted to reject a takeover offer from NASDAQ OMX and Atlanta-based IntercontinentalExchange (ICE).
As previously reported by Corporate Secretary, even though NASDAQ’s offer for the NYSE is 20 percent more than Deutsche Börse’s merger offer, the NYSE’s board isn’t required to consider it.
‘Because the Deutsche Börse/NYSE deal is a stock-for-stock exchange deal, it qualifies under Delaware law as a merger of equals,’ explains John Coffee, a corporate governance expert and Columbia Law School professor. That means the NYSE board isn’t obliged to pursue the highest offer and can ignore the NASDAQ offer.
‘Deutsche Börse doesn’t really compete with the NYSE but NASDAQ does, tooth and nail. Therefore, the NYSE board could justifiably determine that the NASDAQ offer – although financially superior – is not a superior proposal because of the regulatory problems,’ Coffee adds.
The NYSE says its board decided to turn down the takeover bid, which was submitted earlier this month, because it was a ‘highly conditional proposal’ that would usher in ‘unacceptable execution risks’.
‘The NYSE wants to go more international and that is the strategic focus of the merger,’ says Peter Bible, partner at accounting and advisory firm EisnerAmper. ‘NASDAQ’s bid would be great for shareholders but terrible for consumers, which is why the NYSE would have difficulty with antitrust laws. I think the NYSE board made the right decision.’
The Big Board claims the deal with Deutsche Börse will better align the companies to become the ‘leading global exchange operator’, which will ‘create substantially more long-term value for shareholders, and is significantly more likely to close.’
‘Breaking up NYSE Euronext, burdening the pieces with high levels of debt and destroying its invaluable human capital would be a strategic mistake in terms of where the global markets are going, and is clearly not in the best interests of our shareholders,’ says Jan-Michiel Hessel, chairman of the NYSE.
Neither NASDAQ nor ICE has issued any response to the rejection.
The NYSE intends to push forward and merge with Deutsche Börse in the $10 billion transaction announced in February, which will allow the combined entity to become a leader in equities trading, capital raising, derivatives trading and risk management.
Based on 2010 net revenues, the combined group earned approximately 37 percent of its total revenues in derivatives trading and clearing and 14 percent in market data, index and technology services, according to the NYSE.
