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WSJ: Nasdaq Faces Schumer Inquiry in Bid for NYSE Euronext

Monday, 25 Apr 2011 09:20 AM

Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. may have to add scrutiny by U.S. Senator Charles Schumer to potential obstacles facing their unsolicited takeover bid for NYSE Euronext.

Schumer, a New York Democrat, wrote to the companies asking for data on job losses in their $11.3 billion proposal, the Wall Street Journal reported yesterday, citing an unidentified person familiar with the matter. In a letter that may be sent today, Schumer asks for an estimate “prior to taking additional steps in your acquisition efforts,” the Journal said.

NYSE Euronext rejected the Nasdaq-ICE offer for the second time in two weeks on April 21, citing the potential for layoffs and “execution risk” posed by government antitrust review. The New York Stock Exchange operator has stuck to its two-month-old agreement to merge with Frankfurt-based Deutsche Boerse, a plan that would create the world’s largest exchange operator.

Nasdaq OMX Chief Executive Officer Robert Greifeld and ICE CEO Jeffrey Sprecher have said they are meeting with NYSE Euronext shareholders as they try to head off the $9.53 billion Deutsche Boerse agreement. Their offer, valued at $42.83 per NYSE Euronext share on April 21, is priced about 14 percent higher than the bid from Deutsche Boerse.

Nasdaq spokesman Frank De Maria declined to comment yesterday in an e-mailed statement.

Merger Wave

NYSE’s merger announcement with the Frankfurt-based company on Feb. 15 helped propel a wave of exchange consolidation that has seen about $20 billion of deals announced in less than six months. NYSE Euronext CEO Duncan Niederauer considers the Deutsche Boerse proposal a merger of equals that fits the New York-based company’s long-term strategy of increasing revenue through expansion.

Niederauer said in an April 10 interview with Bloomberg that the Deutsche Boerse deal would be better for New York City than the Nasdaq OMX-ICE proposal. The combined entity with Deutsche Boerse would have about 6,200 or 6,300 employees at the time the deal closed, he said.

“What we’ve been perplexed by is how you promise all these synergies but then caveat it by saying it’s going to be great for New York, it’s going to create jobs in New York,” he said, referring to the Nasdaq OMX-ICE offer. “I don’t know how you deliver those kinds of synergies without eliminating hundreds if not above 1,000 jobs in New York.”

Left Out

Nasdaq OMX had been left out of the consolidation wave since October, when Singapore Exchange Ltd. offered A$8.35 billion ($8.97 billion) for Sydney-based ASX Ltd. In addition to the Deutsche Boerse offer in February, London Stock Exchange Group Plc said that month that it would buy Canada’s TMX Group Inc. The ASX deal was blocked by the Australian government.

Greifeld says his plan to purchase NYSE Euronext offers at least 27 percent more in cost savings and revenue synergies than Deutsche Boerse’s proposal. New York-based Nasdaq OMX, the second-largest U.S. bourse operator, and ICE in Atlanta say they will generate about $740 million in both expense cuts and synergies in three years. The Deutsche Boerse deal estimates 400 million euros ($582.36 million).

Schumer, the Senate’s third-ranking Democrat, has yet to announce support for either proposal. He said when the New York Stock Exchange owner announced its agreement with Deutsche Boerse in February that the U.S. company’s name should be retained should the combination be completed.

“NYSE is one of the preeminent brands in the financial industry, and there is no reason it shouldn’t come first in the new exchange’s name,” he said in a statement on Feb. 15. “If Deutsche Boerse pushes any alternative name, it would be an indication that they are not viewing this deal as a merger of equals and that could have negative consequences with regard to future decisions on the merger’s implementations.”

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