For financial exchanges it’s all about mergers now as each tries to grow its own business and keep competitors at bay. Stock markets around the world announced more than $20 billion of deals in the seven months through May. NYSE Euronext (NYX) is standing tall amid the turmoil. The company has six stock markets and four main derivatives exchanges in six countries. It owns the New York Stock Exchange (NYSE) and NYSE Liffe derivatives market.
In February, NYSE Euronext agreed to a $9.53 billion merger with Frankfurt-based Deutsche Boerse (DB1), which owns Germany’s stock exchanges and other markets. Nasdaq OMX Group (NDAQ) and IntercontinentalExchange (ICE) made a competing bid for NYSE Euronext, but dropped it in May, when the Justice Department threatened an anti-trust lawsuit.
A merger between NYSE Euronext and Deutsche Boerse would create the world’s biggest exchange company. A major hurdle for the deal is obtaining approval from European regulators. NYSE Euronext CEO Duncan Niederauer has expressed optimism on this score and anticipates success this year.
NYSE Euronext enjoyed a 19 percent rise in net income to $155 million in the first quarter from a year earlier.
"These solid results reflect growing strength and momentum across our businesses and validate our long-term strategy to focus on diversifying and expanding our global footprint,” Niederauer said in a statement accompanying the earnings report.
Shareholders of each company also must approve the deal. And to gain their assent, the companies may offer a special dividend, says analyst Richard Repetto of Sandler O’Neill & Partners.
“Though they (NYSE executives) felt they were always shareholder friendly, the higher counter bid made them take a long hard look at how they were interacting with shareholders,” he wrote.
“With little appetite for M&A (merger and acquisition) activity at present, the potential remains for NYSE Euronext and Deutsche Boerse to optimize their capital position and pay a one-time dividend to shareholders at the closing of the deal.”
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