New York Stock Exchange to buy European rival

The New York Stock Exchange is to buy Euronext for about $10bn (€7.8bn) in cash and stock, creating the first transatlantic securities market in a deal that would pressure rival exchanges to consolidate.

NYSE Group trumped a competing bid by Deutsche Boerse AG to acquire Paris-based Euronext NV, which operates stock markets in Paris, Amsterdam, Brussels and Lisbon.

Once approved by shareholders and regulators, the New York Stock Exchange and Euronext will handle about $2.1 trillion (€1.6 trillion) in stock trades each month and have a market value of $20bn (€15.6bn).

The acquisition of Europe’s second-largest stock ushers in a new era for financial markets, one in which investors can trade stocks, options, futures, commodities and corporate bonds on two continents up to 12 hours a day.

NYSE’s move also ups the ante for rival exchanges – chiefly the Nasdaq Stock Market and Deutsche Boerse – to assemble their own deals to avoid being left behind in global consolidation.

“This is an important development in the history of the NYSE, Euronext and the global capital markets,” NYSE Chief Executive John Thain said in a statement. “A partnership with Euronext fulfils our shared vision of building a truly global marketplace with great breadth of product and geographic reach that will benefit all investors, issuers, and our shareholders and stakeholders.”

The newly formed NYSE Euronext will have a market value of £11bn (€8.6bn), making it the world’s most valuable securities market. The largest is currently Chicago Mercantile Exchange Holdings, which is worth about £8.6bn (€6.7bn).

Under the proposal, each NYSE share would be converted into one share of common stock of the new combined company NYSE Euronext. Holders of Euronext ordinary shares would be offered the right to exchange each of their shares for 0.98 share of NYSE Euronext stock and €21.32 in cash.

The deal gives Euronext shareholders a “mix and match” option to select how much cash or stake in the newly combined company they prefer. Euronext will also pay a previously announced dividend of €3 per share.

The exchange will have its group headquarters at the NYSE’s current base in New York and European headquarters at Euronext’s base.

Euronext chairman Jan-Michiel Hessels will maintain that position, while Thain would continue as chief executive. The board of a combined company would include 11 directors from NYSE and nine from Euronext.

Each of the companies’ markets would come under the jurisdiction of local regulators – a move that seemed to be aimed at addressing concerns that European exchanges would have to comply with stricter US market rules. Passage of the deal is expected to be a co-operative effort between regulators in the US and Europe.

“We are working with our counterparts in Paris and Amsterdam to establish a co-operative approach to the type of combination being proposed,” said Securities and Exchange Commission chairman Christopher Cox. “We have every expectation that a transaction can take place that will benefit investors in all of the affected countries.”

Common shares of NYSE Euronext would be listed on the New York Stock Exchange and Euronext.

Both exchanges believe the combination will create cost savings of £208m (€302m), with some £138m (€201m) of that from integrating their technology platforms. NYSE Euronext is expected to be launched within six months, following regulatory and shareholder approval.