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NYSE-Euronext was purchased by long-time rival IntercontinentalExchange after the success of an unlikely merger.
NYSE-Euronext is a 220 year old icon of global finance, but its 12 year-old Atlanta-based rival, IntercontinentalExchange (ICE) will buy it for $8.2 billion, according to a deal that has just been announced.
This revelation surprised a lot of people on the Street who thought all the exchange horse trading of 2010-2011 was over. In 2011, for example, the Justice Department blocked ICE and Nasdaq's attempt to buy the NYSE. NYSE was also stopped from merging with Germany's Deutsche Borse.
Since 2010, $32 billion worth of attempted exchange merger/purchase deals have failed.
Here are the terms of the NYSE-Euronext ICE deal (form NYSE-Euronext):
Under the terms of the agreement, which was unanimously approved by the Boards of both companies, the transaction is currently valued at $33.12 per NYSE Euronext share, or a total of approximately $8.2 billion, based on the closing price of ICE’s stock on Dec. 19, 2012. NYSE Euronext shareholders will have the option to elect to receive consideration per NYSE Euronext share of (i) $33.12 in cash, (ii) 0.2581 IntercontinentalExchange common shares or (iii) a mix of $11.27 in cash plus 0.1703 ICE common shares, subject to a maximum cash consideration of approximately $2.7 billion and a maximum aggregate number of ICE common shares of approximately 42.5 million. The overall mix of the $8.2 billion of merger consideration being paid by ICE is approximately 67 percent shares and 33 percent cash. The transaction value of $33.12 represents a 37.7 percent premium over NYSE Euronext’s closing share price on Dec. 19, 2012.
NYSE Euronext shareholders will own approximately 36 percent of ICE shares post-transaction.
It's all an attempt by exchanges to get bigger, more important business in a world of declining trading commissions where big investors (like mutual funds) are turning to private, dark pools to trade.
For its part, NYSE-Euronext has seen its share of trading in stocks listed on the exchange fall from 82 percent to 21 percent, according to Bloomberg. And while it does own the largest exchanges by value of listings in the US, and parts of Europe, it needs to grow its share in a business that has become more important than trading simple stock and stock options — trading derivatives.
From January to September of this year, NYSE-Euronext made $357 million, down 32 percent from the same period last year.
That's where ICE comes in. It's a commodities futures exchange that especially focuses on energy futures. Since NYSE-Euronext doesn't have that business, the Justice Department may not consider this merger an anti-trust violation.
The trading of NYSE-Euronext stock were halted as the deal was being discussed, but before that it seemed like the market liked the idea of the ICE buying NYSE-Euronext as their shares were soaring.
IntercontinentalExchange to Acquire NYSE Euronext For $33.12 Per Share in Stock and Cash, Creating Premier Global Market Operator
- Supports transformative opportunities in clearing and market structure amid regulatory change;
- Dual headquarters in Atlanta and New York; will maintain iconic NYSE buildingATLANTA and NEW YORK and PARIS, Dec. 20, 2012 – IntercontinentalExchange (NYSE: ICE), a leading operator of global markets and clearing houses, and NYSE Euronext (NYSE: NYX), the preeminent global equity, equity options and fixed income derivatives market operator, today announced a definitive agreement for ICE to acquire NYSE Euronext in a stock-and-cash transaction. The acquisition combines two leading exchange groups to create a premier global exchange operator diversified across markets including agricultural and energy commodities, credit derivatives, equities and equity derivatives, foreign exchange and interest rates. With leading clearing capabilities, the combined company will be well positioned to deliver efficiencies while serving customer demand for clearing and risk management globally.
Under the terms of the agreement, which was unanimously approved by the Boards of both companies, the transaction is currently valued at $33.12 per NYSE Euronext share, or a total of approximately $8.2 billion, based on the closing price of ICE’s stock on Dec. 19, 2012. NYSE Euronext shareholders will have the option to elect to receive consideration per NYSE Euronext share of (i) $33.12 in cash, (ii) 0.2581 IntercontinentalExchange common