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A tie-up with the New York Stock Exchange (NYSE) would create the world's leading stock market, valued at 16 billion euros (21 billion dollars).
The combined entity, which would be named NYSE Euronext, would list companies valued at 21 billion euros (27 billion dollars), nearly three times that of its nearest rival.
Meeting on Monday the Euronext supervisory board said it favoured the bid by the NYSE, which has offered to buy the operator of financial markets in Paris, Amsterdam, Brussels and Lisbon in a deal worth 8.0 billion euros.
'The supervisory board and managing board of Euronext consider that the transaction with the NYSE offers the most attractive combination,' the panel said in a statement.
But it added that proposals by both the NYSE and Deutsche Boerse, which operates the Frankfurt exchange, would be presented to an annual general meeting of Euronext shareholders in Amsterdam on Tuesday.
It said the views of the shareholders would then be considered by the board before it made a final recommendation at a special general meeting in the future.
John A. Thain, chief executive officer of NYSE Group, said earlier Monday in a statement: 'NYSE Euronext will be the world's most liquid and truly global financial marketplace offering unparalleled benefits for investors and issuers in the United States, Europe and across the globe.'
He told a press conference the cost savings generated by a merger would total 293 million euros (375 million dollars) in the first three years and that the deal would boost NYSE annual net profit by 14 percent in the first year, 21 percent in the second and by 'even more' after that.
Deutsche Boerse signalled on Friday it was prepared to make important concessions to Euronext to secure a deal between the markets, notably on the site of company headquarters and on the future structure of the group.
A merger of the NYSE and Euronext would isolate Deutsche Boerse and force the German operator to look for other partners in Europe.
Deutsche Boerse on Monday refused to budge on the terms of its offer of a 'merger of partners,' denying a newspaper report that it was considering an all-share offer that would value each Euronext share at about 90 euros (114 dollars). The German company has yet to reveal financial details of its offer.
The NYSE is offering 0.980 of its own shares and 21.32 euros in cash per Euronext share, which values Euronext at about 71 euros per share based on the closing price of NYSE shares on Friday. 'If Deutsche Boerse still is to have a chance it has to, in our view, make a significantly higher offer (than the NYSE) in order to overcome the political resistance from Euronext's management,' said an analyst at German bank Landesbank Rheinland-Pfalz, Olaf Kayser.
French Finance Minister Thierry Breton insisted that any deal involving Euronext would have to 'maintain strong activity in Paris.'
Among four 'areas for great vigilance' he said that competition would also have to be maintained in the clearing and transaction business and that the governance of Euronext should remain federal in nature representing national markets.
In addition, the French market would have to remain subject to regulation by the French AMF watchdog.
Investors appeared sceptical about Deutsche Boerse's chances of success. The company's shares plunged 8.52 percent to close at 101.30 euros Monday.
In Paris Euronext shed 9.45 percent to finish at 67.55 euros as profit-taking set in after the NYSE unveiled its offer.