16 October 2006

FT: Euronext and NYSE shift tack on merger

Euronext and the New York Stock Exchange on Sunday offered to open talks with Deutsche Börse and Borsa Italiana about the purchase of their share trading businesses in a tacit acknowledgement of the growing hurdles their own merger plan now faces.

The two exchanges, in a press statement on Sunday, said they were making their offer in light of Deutsche Börse’s “unilateral” move to seek clearance from European competition authorities for an alternative merger plan between it and Euronext that could eventually lead to a single eurozone exchange.

Advisers to Euronext said the Paris-based exchange viewed the move as “hostile”. Euronext has long resisted efforts by Deutsche Börse to get it to agree to a merger, citing, among other things, the likelihood that competition authorities in Brussels would object. Deutsche Börse’s move will put that to the test. They are offering the Italian and German exchanges one seat each on a board of 22 members, equally split between US and European representatives. Deutsche Börse on Sunday repeated its previous view that such an offer was unattractive.

Euronext and NYSE on Sunday sought to portray their deal as the best for Europe. “This combination would be advantageous to Europe while leveraging transatlantic synergies,” they said. A Euronext spokesman added that it was still confident its tie-up with NYSE would go ahead.

However, objections to it have arisen from various quarters of European political and financial circles almost daily for over a week. On Friday, Deutsche Börse formally rejected the offer to sell its equities business to a combined NYSE/Euronext and the Italian stock exchange is understood to be equally cool about such a transaction.

On Thursday, Borsa Italiana also implicitly rebuffed the NYSE/Euronext tie-up, with its board authorising its executives instead to work with Deutsche Börse on seeking a three-way merger of continental exchanges. Just one week earlier a report from French industrialist Henri Lachmann, prepared on behalf of lobbying group Paris Europlace, concluded that the tie-up with the NYSE would amount to a takeover of Euronext by the US exchange with no guarantee of any benefits for the French market.
By Norma Cohen

© Financial Times