Nasdaq/ICE Bid for NYSE Fails
The New York Stock Exchange board of directors has rejected the merger bid by Nasdaq/ICE in favor of the deal with Deutsche Börse, expressing the belief that the influential German exchange is offering what it termed as “substantially more long-term value for shareholders”. However, while expressing disappointment in the decision, spokesperson for Nasdaq, Frank De Maria noted that it is their belief that this response by NYSE “clearly does not reflect the best interest of their shareholders”.
This turn of events has analysts speculating whether Nasdaq and InterContinental Exhange will press forward with a hostile bid, which will no doubt lead to a long battle for the iconic New York Stock Exchange. In a hostile bid, Nasdaq would appeal directly to the shareholders of NYSE against the wishes of the board. Shareholders may still choose to back the board in its decision, and in an era where exchanges around the world are consolidating, Nasdaq runs the risk of being marginalized if it fails in its attempts to join forces with NYSE. With the Nasdaq deal being worth approximately 16 percent more than the Deutsche Börse proposal, there has reportedly been an indication from some shareholders that they would be willing to back Nasdaq.
The Deutsche Börse proposal aims to combine its futures markets with those of NYSE Euronext. The Nasdaq proposal calls for splitting NYSE’s business with ICE taking over its derivatives business, and the stock exchange and options portfolios going to Nasdaq. However, Nasdaq and NYSE joining forces would create a powerful US listings base.
Another reason cited for NYSE going with the Deutsche Börse deal, is the belief that it is more likely to meet with approval by regulatory authorities. Referring to the proposal by Nasdaq/ICE as “highly conditional” a statement released by NYSE noted that it would “require shareholders to shoulder unacceptable execution risk”. However, there is little doubt that the Deutsche Börse deal will have regulatory issues of its own. as it would create a significant presence in some European financial products. There are also general rumblings of dissatisfaction on Wall Street about a foreign company joining their ranks through a take-over of this nature.
Certainly, the days ahead will be interesting on Wall Street as it has become evident that NYSE is serious about joining forces with one or the other of its suitors. It remains to be seen which one and what impact it will have on listed companies and those who make a living out of stock market investing.