German Bourse Acquires NYSE in $10Bn Deal

The New York Stock Exchange, founded in 1792, and the icon of American capitalism for more than a century, has been acquired by its German rival, the Frankfurt Stock Exchange (DAX), after losing ground to younger, smaller, more technologically savvy foreign competitors. NYSE Euronext and Deutsche Börse agreed on Tuesday to a $10 billion all-stock merger, combining two of the world’s biggest stock exchanges into a trans-Atlantic powerhouse. The union of the operators of the New York Stock Exchange and the Frankfurt Stock Exchange marks the biggest instance of consolidation among exchanges, as established players contend with smaller electronic markets that have seized greater market share. For instance, just last week, the London and Toronto stock exchanges announced their own merger, and in October SGX, the operator of the Singapore stock exchange, announced plans to buy the Australian Stock Exchange.

By merging, the two companies hope to create a giant among financial markets, allowing investors access to thousands of stock listings in the United States and Europe, as well as options, derivatives and other services. But the deal has also stoked fears that New York and its iconic “Big Board” are ceding prominence as a major financial capital. “This transaction brings together two of the most respected and successful exchange operators in the world to lead the way in global capital markets and set the standard for growth, quality and market reach,” Reto Francioni, Deutsche Börse’s chief executive, said in a statement.

Duncan Niederauer, NYSE Euronext’s chairman, added: “This transaction is a catalyst for the development of a global capital markets community, delivering the best, most transparent, and innovative services for clients and issuers, wherever they are.” NYSE Euronext and Deutsche Börse sealed the deal on Tuesday morning following votes by both boards. Under the terms of the deal, Deutsche Börse will issue .47 of a share for each NYSE Euronext share, a roughly 10% premium to the American exchange’s stock price. The deal values NYSE Euronext at about $10 billion.

As expected, Mr. Francioni of the Deutsche Börse will become the combined company’s chairman, while the American, Mr. Niederauer of NYSE Euronext, will hold the title of chief executive. Deutsche Börse will hold 10 seats on the combined company’s 17-seat board, owing to its shareholders owning about 60% of the merged exchange operator’s shares. Yet the majority of shareholders in the combined company is likely to consist of American investors: As of year-end, about half of the ownership in both exchange operators was held by United States institutions. Only a fraction was owned by German shareholders.

NYSE Euronext executives will hold key management positions, including those of chief operating officer, head of global information technology and general counsel. The combined company, for now, will have dual headquarters in New York City and Frankfurt, although it will be incorporated in the Netherlands. Together, the two exchanges anticipate more than $400 million in annual cost savings. Read more here…