05 June 2006

Telegraph: NYSE Euronext woos Italian exchange

Massimo Capuano, the chief executive of the Italian stock exchange, is to be offered a seat on the board of the new enlarged NYSE Euronext group as part of attempts to bring Borsa Italiana into the merger discussions over the next few days.

John Thain, the chief executive of NYSE Group, the owner of the New York Stock Exchange, and Jean-François Théodore, his counterpart at Euronext, unveiled details of their agreed Dollar 20bn merger of equals on Friday.

The board of the merged company will consist of 11 directors nominated by NYSE and nine from Euronext, of which one is the chairman. But sources say the apparent imbalance is to allow for the appointment of Capuano, who already has a close relationship with Théodore through MTS, their jointly owned bond-trading platform.

The addition of the Italian exchange to the merged group is expected to pose an even greater threat to London's position as Europe's premier stock exchange. The LSE has beaten its peers in recent years in attracting overseas listings. The deal is expected to force the LSE into the arms of Nasdaq, the US exchange, which has acquired a 25 per cent stake.

The news comes as Deutsche Börse, the German exchange operator, continues to attempt to break up the NYSE Euronext deal. Reto Francioni, Deutsche's chief executive, is to canvass Euronext's shareholders directly this week in an attempt to persuade them to switch their allegiance to his rival offer.

Some sources have indicated that he may be willing to increase the cash component of his offer by taking on more debt. Deutsche has in recent weeks appointed Hawkpoint, the London-based advisory firm, alongside its existing advisers at Deutsche Bank.

The NYSE deal values Euro-next at about € 70 a share. According to Euronext, the Deutsche Börse offer is worth € 59 a share. But Deutsche claims the offer is worth € 71.

The NYSE Euronext deal has already garnered substantial shareholder support. Atticus Capital, NYSE's biggest shareholder with a 9 per cent stake, has already approved the deal. The hedge fund manager previously backed moves by TCI, another hedge fund, to force Deutsche Börse and Euronext together. General Atlantic, NYSE's second-biggest shareholder with a 6 per cent stake, has also backed the deal.

A group of French banks that owns 10 per cent of Euronext - and has vowed to protect French interests - voted with Euronext's management at the exchange's recent annual meeting.

But Stichting Pensioenfonds, Europe's biggest pension fund, indicated yesterday that it still had doubts about the deal. Some market sources believe TCI, led by Chris Hohn, may now sell its stakes in Euronext and Deutsche Börse.

Although there have been suggestions that the French government may attempt to block the deal, it is understood that Thain and Théodore were granted informal approval before they finalised their talks. They are likely to set a date for a vote on the deal later this week.

A large part of the rationale behind the NYSE Euronext merger is to attempt to lure overseas listings to Paris and Amsterdam rather than London. It will also attempt to poach companies with investors in Europe and the US to its new, transatlantic pool of liquidity. A number of companies are already listed in Paris or Amsterdam and New York, including Axa, ING and Phillips.
By Iain Dey

© Daily Telegraph