Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, April 11, 2011

NASDAQ, ICE Respond to NYSE's Rejection of Their Proposal

Yesterday NASDAQ OMX and IntercontinentalExchange issued the following statement in response to the rejection by NYSE Euronext (NYX) of their joint proposal to acquire NYSE Euronext, valued at $43.13 per share in cash and stock, as of the close of trading on Friday, April 8, 2011:

NYSE Euronext's Board of Directors, without engaging in any dialogue or discussion, has summarily elected to deny its stockholders the opportunity to benefit from a clearly superior proposal to the announced transaction with Deutsche Boerse, a proposed transaction that is indisputably financially inferior.

This NASDAQ OMX/ICE transaction would create two global leading exchanges, one primarily focused on cash equities and the other on derivatives.  This reduces execution risk and allows investors to make their own allocation decisions.
The superior cash and stock proposal from NASDAQ OMX and ICE provides NYSE Euronext's stockholders with immediate value and a higher premium to the proposal from Deutsche Boerse.
There is greater potential for long-term value creation under the NASDAQ OMX/ICE proposal by placing NYSE Euronext's businesses under management teams with proven track records of unlocking value through successful merger integrations.
Best of breed management of NASADQ OMX and ICE would create two focused alternatives in cash equities and derivatives with less management risk than the conglomerate proposed by NYSE Euronext/Deutsche Boerse.
There are significant execution and integration risks to stockholders with the proposed NYSE Euronext/Deutsche Boerse transaction, given that both managements have histories of failing to achieve promised objectives in previous cross-border merger integrations and the transaction faces European competition hurdles.
NASDAQ OMX and ICE are committed to a prudent use of leverage to finance the transaction. In particular, NASDAQ OMX is focused on maintaining its investment-grade credit rating.

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NASDAQ OMX and ICE reaffirmed their interest in acquiring NYSE Euronext given the benefits to stockholders of all three companies. The NASDAQ OMX/ICE proposal provides NYSE Euronext stockholders with exposure to two focused players in equities and derivative exchanges, while the Deutsche Boerse proposal offers exposure to a single diversified exchange that may receive a conglomerate discount. The NASDAQ OMX/ICE proposal also offers a strategically attractive alternative with stronger potential upside in two best-in-class operators given the superior growth prospects and significant, realizable combined synergies of $740 million annually. NYSE Euronext and Deutsche Boerse, by comparison, have both taken significant write-downs on previous cross-border transactions they have engineered.

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