The NYSE Euronext-Deutsche Boerse deal dilutes a U.S. icon and gives a German company 60 percent control over the combined entity. Image CC rudynorff/Flickr
The parent company of the New York Stock Exchange, NYSE Euronext, agreed to enter a $10 billion all-stock merger with Deutsche Boerse AG. The merger of Deutsche Boerse AG, operator of the Frankfurt Stock Exchange, with NYSE Euronext combines two of the world’s largest stock exchanges. News of the NYSE-Deutsche Boerse merger triggered angst among American politicians, who insisted that the merger place “New York” first in its name in order for the deal to win government approval.
Terms of the NYSE-Deutsche Boerse deal
Deutsche Boerse and NYSE Euronext aim to create a dominant financial market on a global stage. In an all-stock deal that creates the world’s largest owner of equities and derivatives, Deutsche Boerse and NYSE Euronext will swap one symbolic share. Every NYSE Euronext share will be converted into 0.47 share of the combined company that values NYSE Euronext at about $10 billion. Deutsche Boerse will hold 10 seats on the 17-seat board of the corporation, because its shareholders own about 60 percent of the merged shares. NYSE Euronext-Deutsche Boerse will have headquarters in New York and Frankfurt. The combined company will be incorporated in the Netherlands for tax avoidance purposes.
Deal made with eye on derivatives
The NYSE Euronext-Deutsche Boerse deal allows investors access to thousands of stock listings in the U.S. and Europe, plus options and derivatives. The merged entity will list corporations worth about $15 trillion, more than any other stock exchange. The most lucrative aspect of the merger is ownership of growing venues for derivatives, which are are wagers on stocks, bonds, currencies or commodities, or changes in interest rates. Some analysts predict that NYSE Euronext could generate more than 50 percent of its earnings from derivatives by 2013.
A blow to national pride?
To some on Wall Street, the NYSE-Deutsche Boerse deal is a blow to national pride. The Big Board at the NYSE is viewed as an American icon on par with the Washington Monument or Golden Gate Bridge. The fact that the NYSE has been absorbed by a European entity brings stark realization to the fact that U.S. institutions no longer dominate the global marketplace. Senator Charles E. Schumer, D-N.Y., implied that the combined company must place “New York” first in its name for the deal to be approved.
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