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NYSE-Euronext should wait for European consolidation, report says

NYSE-Euronext should wait for European consolidation, report says

An influential French business organization urged Euronext on Thursday to withdraw from its agreement to be acquired by the New York Stock Exchange and also fend off a bid by rival suitor Deutsche Boerse.
The deal agreed to with NYSE Group Inc. would hand too much control to the New York exchange operator and hamper European consolidation, according to the report by Paris Europlace, while Deutsche Boerse's rival bid "entails serious implementation risks."
Euronext NV, which operates the Paris, Amsterdam, Brussels and Lisbon exchanges, should instead pursue consolidation in Europe, the report argues _ starting with the acquisition of the Frankfurt exchange operator's cash equities trading arm.
Only then should Euronext seek an alliance with NYSE, the report concluded.
NYSE CEO John A. Thain, responding to the report in a conference call with reporters, said he doesn't expect it to delay the Euronext deal, which it expects will close in the first quarter of next year.
Euronext agreed in May to be acquired by NYSE for euro8 billion (US$10.2 billion) in cash and stock, rebuffing an offer from Deutsche Boerse, but the project has drawn criticism from some powerful shareholders who prefer the all-European deal.
Paris Europlace, which promotes the French capital as a financial center, commissioned the report a month later from Schneider Electric Chairman Henri Lachmann as its member companies weighed the competing bids.
Under Lachmann's proposals, Euronext should acquire Deutsche Boerse's cash equities business in exchange for a stake of up to 20 percent in the combined company _ leaving aside the Frankfurt exchange's derivatives trading and clearing and settlement arms.
"This would initiate a process that could naturally bring Borsa Italiana within the scope of the pan-European exchange and lay the foundations for a future alliance with NYSE on a more balanced basis," the report said.
Borsa Italiana declined to comment on the agenda of a board meeting it held Thursday or on media reports that the exchange could sign a merger agreement with Deutsche Boerse this week.
Some analysts say a full Euronext-Deutsche Boerse merger would cause antitrust problems because of the combined entity's estimated 90 percent share of the European derivatives trading market and the German operator's integrated clearing and settlement model. Unlike Euronext or NYSE, Deutsche Boerse offers trading, clearing and settlement all under one roof.
But the Deutsche Boerse breakup proposal is likely to meet with hostility in Germany, where some ministers and local politicians have already criticized the Frankfurt exchange for offering to shift too much regulatory and management clout outside the country in its latest Euronext bid.
Euronext and Deutsche Boerse both claimed the report as vindication of their strategies. Euronext welcomed the recommendation that it acquire Deutsche Boerse's cash equities business but insisted this could be done "in parallel" with the NYSE deal.
Deutsche Boerse said the report showed that the NYSE-Euronext deal was "not in the best interests of the European marketplace." Spokesman Walter Allwicher declined to comment specifically on the call for a deal involving only the cash equities arm.
Thain said the NYSE remains open to the idea of adding other cash markets to an NYSE-Euronext alliance.
"Whether it's Borsa Italiana or whether it's Deutsche Boerse's cash business, that's something we will be receptive to," he said, according to a transcript of the conference call.
Several Paris Europlace members, including utilities Suez SA and Veolia Environnement SA, are among a larger group of companies that has built up a combined 5 percent stake in Euronext to press their common concerns _ such as lower transaction costs and easier cross-border trading within Europe.
But another group of Euronext investors including hedge fund TCI, which holds a 10 percent stake, is pressing for a deal with Deutsche Boerse. TCI boss Chris Hohn recently demanded that shareholders be allowed to vote on the Deutsche Boerse bid.
Euronext NV shares rose 3.6 percent to euro79.00 (US$100.20), while shares in Deutsche Boerse AG were up 1.5 percent at euro119.82 (US$151.98). In New York, NYSE Group shares rose US$2.10, or 2.8 percent, to US$76.50 (euro60.31).
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Dow Jones Newswires Correspondent Digby Larner contributed to this report.


Updated : 2021-05-14 11:15 GMT+08:00