Nasdaq OMX Group and IntercontinentalExchange responded late Sunday to NYSE Euronext's rejection of their joint proposed bid, reaffirming that their cash and stock offer is superior to the offer submitted by rival Deutsche Boerse AG.
"The feedback we have received from NYSE Euronext stockholders is very positive, and we would expect NYSE Euronext would, at the very least, meet with us and our advisors to discuss the merits of the proposed combination," Robert Greifeld, Chief Executive Officer of Nasdaq, said in the statement.
NYSE on Sunday said it was sticking with its deal with Deutsche Boerse, calling the rival offer from Nasdaq OMX Group too risky and counter to the Big Board's vision.
The NYSE board's decision smacks the ball back in the court of Nasdaq, which with partner IntercontinentalExchange Inc will have to decide whether to appeal directly to NYSE shareholders, raise the $11.3 billion bid, or walk away.
Perhaps setting the tone for what could be a drawn-out bidding process, NYSE Euronext Chief Executive Duncan Niederauer criticized Nasdaq's unsolicited bid as hollow and undefined, saying it would unacceptably carve up his trans-Atlantic exchange operator.
"It's hard to call it an offer because it's a loosely worded proposal that was, in our minds, an empty vessel," he said in an interview.
"We had a strategy. The combination with Deutsche Boerse is consistent with that strategy. A dismantling of the company is not. End of story," added Niederauer, who would take the reins of a combined Deutsche Boerse-NYSE Euronext.
The formal rejection comes nine days after Nasdaq and ICE unveiled their plan, arguing it would strengthen the United States' hand as the world's bourses scramble to band together to fend off smaller rivals and find new profits.
On Sunday, Nasdaq said "there are significant execution and integration risks to stockholders with the proposed NYSE Euronext/Deutsche Boerse transaction," citing among other factors that the transaction faces European competition hurdles.
But NYSE Euronext's directors, which oversee the Big Board and a handful of European exchanges, found the bid from Nasdaq and ICE "strategically unattractive, with unacceptable execution risk" — a reference to the antitrust concerns that could come between NYSE and Nasdaq, the top two U.S. exchanges.
The friendly, $10.2 billion deal with Germany's Deutsche Boerse was in shareholders' long-term interest, and "significantly more likely" to be completed, the board said. That merger, announced in February, would create the world's biggest exchange operator.
The counteroffer would give Nasdaq stock exchanges in New York, Amsterdam, Brussels, Lisbon and Paris, as well as U.S. options platforms and technology, while Atlanta-based ICE would get NYSE Euronext's London-based Liffe platform and other derivative businesses.
"Breaking up NYSE Euronext, burdening the pieces with high levels of debt, and destroying its invaluable human capital, would be a strategic mistake in terms of where the global markets are going, and is clearly not in the best interests of our shareholders," NYSE Euronext Chairman Jan-Michiel Hessels said in a statement.
ICE did not immediately comment.
The battle for the parent of the venerable New York Stock Exchange has boosted its shares more than 15 percent. Now, shareholders could face more weeks of uncertainty as the exchanges reposition themselves.
Though linking with Deutsche Boerse may be a better long-term plan, Nasdaq and ICE may be able to convince NYSE shareholders that their proposition is better in the short term, said Brendan Caldwell, president of Toronto-based Caldwell Investment Management Ltd, which holds NYSE shares.
"With the increasing uncertainty in the marketplace, the short term becomes more important," he said.
Niederauer, a fierce rival of Nasdaq counterpart Robert Greifeld, tamped down speculation that a bidding war could ensue, arguing Deutsche Boerse did not technically bid for NYSE Euronext.
"It's not clear to me that it will escalate because I don't know what would escalate from here," he said.
NYSE Euronext directors were concerned that Nasdaq and ICE had failed to line up committed bank financing for their bid, and that a takeover could saddle the combined entities with too much debt, a person familiar with the board's thinking said.
Directors also worried that a Nasdaq-NYSE merger could cost too many jobs in New York City, the person added. The person requested anonymity because of a lack of authority to speak for NYSE Euronext.
In announcing their cash-and-stock bid on April 1, Nasdaq and ICE had valued NYSE Euronext at $42.50 per share, 12 percent above Deutsche Boerse's offer.
In a separate statement, Deutsche Boerse said the merger remains "on track" to close by the end of the year.
Niederauer said Deutsche Boerse's CEO Reto Francioni, who would be chairman of the combined entity, is set to visit New York this week, and that the companies would attempt to outline more clearly the benefits of their tie-up plan.
Both proposed deals are certain to attract antitrust scrutiny, which has also emerged as a hurdle for other potential exchange mergers.
On Friday, Singapore Exchange Ltd ended a takeover bid for exchange operator ASX Ltd after Australia's government rejected that offer.
An NYSE Euronext merger with Deutsche Boerse would likely draw regulatory scrutiny over the combined companies' expected dominance in European derivatives trading and clearing.
Similarly, merging Nasdaq with the NYSE could prompt U.S. antitrust issues, given that the largest U.S. stock exchanges would have a virtual monopoly on listings and dominance in trading U.S. cash equities and options.
Greifeld, Nasdaq's CEO, has called any potential antitrust issues "manageable."
In Friday trading on U.S. markets, NYSE Euronext shares closed at $38.70, Nasdaq OMX at $28.45 and ICE at $120.55.
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