Deutsche Boerse and NYSE Euronext are poised to announce a deal to create the world's largest exchange operator, setting aside political issues that still threaten its completion.
Such local concerns over a wave of consolidation sweeping the industry surfaced in Asia on Tuesday. Singapore Exchange tweaked its $7.9 billion bid for rival ASX to allow more Australian directors onto a combined board in an attempt to win over skeptical Australian politicians.
Nationalism has long been one of the biggest hurdles to exchange mergers. The marketplaces are often symbols of national pride and important to attracting business and capital.
Despite this, key details of the Deutsche Boerse and NYSE tie-up have been hammered out and a definitive deal is to be announced later on Tuesday, with a press briefing planned for 1500 GMT, several sources familiar with the plans said.
Earlier Deutsche Boerse's powerful supervisory board met to discuss the deal, a member of the board told Reuters. But several thorny issues have yet to be addressed, adding to concerns on both sides of the Atlantic.
The companies are likely to avoid delicate issues such as a name, and specific details about where job cuts would fall as a way to keep national and political forces on board.
Deutsche Boerse and NYSE Euronext declined to comment.
Regulators are paying close attention to the latest round of deals, including a bid by the London Stock Exchange to take over Toronto Stock Exchange operator TMX Group.
Exchange users have also raised red flags over the proposed deals, which they fear will limit competition.
"Euronext and Deutsche Boerse are still screwing us on fees for clearing, the closing auctions and small and mid-cap trading -- the areas where they still have virtual monopolies," said the head of markets at a large European bank, who declined to be named. "A merger is concerning because together they will be more powerful and better placed to protect these monopolies."
The LSE deal with TMX has already run into foreign ownership concerns in Canada.
But despite rumblings about Middle Eastern ownership in Ontario, LSE shareholder Borse Dubai, which is owned by the ruler of the Gulf Arab emirate, has not been asked to trim its 20 percent stake, a source familiar with the matter said.
Singapore Exchange's willingness to give ground and award an equal number of board seats to Australians and Singaporeans in the combined entity shows how local sensibilities are being overcome as the pressure to consolidate rises. The value of SGX's offer has not been changed under the new proposal.
"All the resistance ... has been political. The steps taken today should address some of those political issues," said Mark Nathan, portfolio manager at Arnhem Investments.
Similar political and regulatory hurdles may threaten the Deutsche Boerse-NYSE Euronext tie-up.
"The biggest question mark in general is obviously the European political and regulatory landscape coming out of this," one source said.
The Frankfurt- and New York-based companies were center-stage in the merger frenzy that erupted last week and heated up on Monday as Brazilian exchange operator BM&FBovespa said it was looking at its own prospects and as speculation intensified that CME Group, the world's largest derivatives exchange, could jump into the fray.
Fox Business Network reported that CME Group might make a hostile bid for NYSE Euronext, citing bankers.
A spokesman for the Chicago-based exchange declined to comment. CME officials have been guiding investors away from expectations of a merger deal.
BM&FBovespa, the world's fourth-largest financial exchange operator, is closely looking out for tie-up opportunities, Chief Executive Edemir Pinto told Reuters. Pinto said China and India were markets where it could expand.
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Deutsche Boerse and NYSE had previously announced that NYSE Euronext head Duncan Niederauer would head the combined group, Deutsche Boerse Chief Executive Reto Francioni would be chairman, and that the German company's shareholders would get about a 60 percent stake.
At a 60-40 ownership split, 55 percent of shareholders would be U.S. investors, 11 percent from Germany, 11 percent from the UK and 23 percent from the rest of the world, a source said.
The board of the combined company would reflect the ownership structure, with 10 of the 17 members from the German side, a source said, adding this included Niederauer and Francioni.
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