NYSE deal advances

The parent company of the New York Stock Exchange said Tuesday that it agreed to be acquired by the operator of the Frankfurt stock exchange in a deal that will create the world's largest financial markets company.

The new company, a combination of NYSE Euronext Inc and Deutsche Boerse, will have dual headquarters in Frankfurt and New York.

The companies did not say what the new company would be called.

NYSE Euronext CEO Duncan Niederauer will be chief executive, and Deutsche Boerse CEO Reto Francioni will become chairman.

The new company will own exchanges in New York, Frankfurt, Paris, Amsterdam and other cities that will continue to operate under their existing names.

Deutsche Boerse shareholders will own 60 per cent of the new company, while shareholders of NYSE Euronext will own 40 per cent, valuing NYSE's parent company at about US$10 billion.

The combined company will be worth US$25 billion, according to Sandler O'Neill analyst Richard Repetto.

A new holding company based in The Netherlands will hold the assets of Deutsche Boerse and NYSE Euronext.

Deutsche Boerse shareholders will get one share in the new company for each share they own, while NYSE Euronext shareholders will get 0.47 of a share.

The boards of both exchange owners have signed off on the deal, but it must still be approved by shareholders and regulators.

Owners of traditional stock exchanges have been combining for several years to save costs as competition mounts from new computerised stock exchanges with names like BATS and Chi-X.

The NYSE Group, operator of the New York Stock Exchange, bought Euronext for US$10.2 billion in 2007, beating out a rival bid from Deutsche Boerse. The combined company handles stock and derivative markets in Amsterdam, Brussels, Lisbon and Paris as well as the NYSE Liffe derivatives market.

Deutsche Boerse, whose predecessor was founded in 1585, operates the stock market in Europe's largest economy.

It also runs Europe's largest derivative exchange, the Eurex.

The deal is expected to lead to US$400 million in savings, mainly from technology and clearing costs.

It will also give the combined company a larger footprint in the lucrative business of trading in futures and options contracts.

The largest exchange owner in the US is currently the US$20 billion CME Group Inc.

CME runs the Chicago Mercantile Exchange, where wheat, corn and pork belly futures are traded, as well as a number of other exchanges.

Shares of both companies fell after the deal was announced. NYSE Euronext's shares fell 3.7 per cent in New York, while Deutsche Boerse's fell 1.5 per cent in Frankfurt.

NYSE shares had jumped 14 per cent February 9 after press reports that it was in talks with the German company.

- AP