Germany’s Deutsche Boerse AG, the company that owns and runs Frankfurt stock exchange, could soon take over the American’s New York Stock Exchange. NYSE Euronext Inc., which also operates exchanges in Europe, said it is in “advanced discussions” about a possible merger with Deutsche Boerse. The merger would create the world’s largest trading powerhouse with annual trading volume exceeding $20 trillion.
The new company would have dual headquarters in New York and Frankfurt and operates under a new legal entity incorporated in the Netherlands with Deutsche Boerse shareholders holding 59% to 60% of the combined company. NYSE Euronext Chief Duncan Niederauer would be chief executive of the merged company and Deutsche CEO Reto Francioni would be chairman.
Deutsche Boerse and NYSE Euronext claimed they could cut costs by 300 million euros ($400 million) a year in the merger and the combined entity would have $1.6 billion in revenue overseeing 6,700 listed companies. However the merger could see objection from European regulators and U.S. Justice Department who prefer the separation of functions from a clearing house and exchange trading. U.S. regulators also have been wary of allowing foreign companies to own U.S. exchanges.
As comparison, Germany’s Deutsche Boerse AG has market capitalization of almost $11 billion while the NYSE has only $9.2 billion. Shares of NYSE (NYSE: NYX) were up 5.3% to $35.18 before being halted at 10:25 a.m. and after it resumed the NYSE Euronext stock skyrocket 18.7% higher.
In an immediate response, shares of other exchanges particularly CME Group Inc. (Nasdaq: CME), CBOE Holdings Inc. (Nasdaq: CBOE) and IntercontinentalExchange Inc. (NYSE: ICE) moved up north as speculation that Nasdaq OMX Group Inc. (Nasdaq: NDAQ) would be forced to merge with one (or more?) of them to remain big in scale as well.
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