The owners of the New York Stock Exchange have agreed to a takeover by the operator of the Frankfurt stock exchange, Deutsche Boerse.
Deutsche Boerse shareholders will own 60 per cent of the new company. Shareholders of NYSE Euronext Inc. will own the rest. Technically, NYSE shareholders will get 0.47 shares in the company that owns Deutsche Boerse for every share they own, and then Deutsche Boerse shareholders will receive shares in the new company — which has yet to be named — on a one to one basis.
The new company will have dual headquarters in Frankfurt and New York. NYSE Euronext's CEO Duncan Niederauer will be chief executive, and Deutsche Boerse CEO Reto Francioni will become chairman. Shares of both companies fell after the deal was announced. NYSE Euronext's shares fell 3.7 per cent in New York, while Deutsche Boerse's fell 1.5 per cent in Frankfurt.
NYSE Euronext's revenues have fallen recently because of competition from cheaper computerized stock exchanges in the U.S. and Europe. Many other global stock exchanges are in the process of combining to save costs, including TMX Corp., the owners of the TSX, and the London Stock Exchange.
The deal will give NYSE Euronext a larger footprint in the more lucrative business of trading in futures and options contracts. The boards of both exchanges signed off on the deal, but it must still be approved by shareholders and regulators.
The new exchange would be the largest by revenue in the world, but not in terms of the number of companies listed. If the proposed tie-up of the London and Toronto stock exchanges goes ahead, it would take that title.
The New York/Frankfurt deal would create a trading titan with operations in Germany, France, Britain, Amsterdam, Portugal, Belgium, and the United States, handling more than $20 trillion worth of transactions annually.
Details on possible layoffs and a name for the merged company have not been released, most likely to appease nationalistic opposition to the deal on both sides. Stock exchanges are seen as symbols of national pride and perceived to be important for attracting investment and having international influence.
Some are casting a wary eye to the TSX/London link-up along those lines, and regulators in Montreal and Toronto have already pledged to stop it — noting that Dubai and Qatar-based investment funds would own 20 per cent of Canada's only stock exchange, courtesy of their current stakes in the LSE Group.
On Tuesday, the Singapore stock exchange announced a concession to Australian regulators along similar lines, agreeing to give the Australian bourse more board seats if they are successful in their proposed takeover of the Australian Stock Exchange.