December 5, 2023

DealBook: German Exchange Doesn’t Plan to Sweeten NYSE Offer

Deutsche Börse does not plan to sweeten the terms of its merger with NYSE Euronext, because top managers of the German exchange operator are convinced that a rival bid has little chance of success, people with knowledge of the transaction said Monday.

Speaking a day after the NYSE Euronext board rejected a takeover offer that the Nasdaq OMX Group made in partnership with the IntercontinentalExchange, people close to the deal in Germany also disputed estimates that the competing offer is worth 20 percent more than a takeover by Deutsche Börse.

The estimates failed to take into account other costs, like the $355 million breakup fee that NYSE would owe to Deutsche Börse if it accepted another offer, said these people, who spoke on condition of anonymity because they were not authorized to speak publicly. Moreover, they said, there is a big risk that a tie-up with Nasdaq might never come to pass because of regulatory hurdles. For example, a combined Nasdaq and NYSE would have a practical monopoly on new listings, raising antitrust concerns.

On Sunday, NYSE Euronext rejected the Nasdaq bid, citing a long list of concerns, including the job cuts in New York and the amount of debt necessary to finance their bid. Debt rating agencies have said that Nasdaq’s credit rating would suffer from the strain of financing the $11.3 billion offer.

Executives at NYSE Euronext and Deutsche Börse have been talking about a merger off and on for more than two years, giving them a huge head start on seeking the numerous regulatory approvals that will be required. Deutsche Börse planned to submit a draft of an offer to its shareholders to Germany’s bank regulator on Tuesday.

The filing is an important step in making it possible for shareholders of both companies to vote on the deal in July. NYSE and Deutsche Börse plan to complete the merger by the end of the year.

The head start also means that the two companies have already dealt with difficult questions like who will run the combined company. Reto Francioni, chief executive of Deutsche Börse, would be chairman, and Duncan Niederauer, chairman of NYSE Euronext, would be chief executive.

NYSE and Deutsche Börse have a binding contract, while the Nasdaq offer is what Mr. Niederauer on Sunday called a “loosely worded proposal.”

However, the two companies have not agreed on a name for the new entity. They said that, in any case, they will preserve the NYSE Euronext and Deutsche Börse brand names.

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