Last updated: December 20, 2012 11:19 pm

ICE agrees NYSE Euronext takeover

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IntercontinentalExchange has agreed to buy NYSE Euronext, its 208-year-old rival, in an $8.2bn deal that will make the energy and commodities bourse one of the world’s largest derivatives markets operators.

The transaction, announced on Thursday, marks the biggest gamble to date by Jeff Sprecher, ICE’s chief executive, who has long coveted NYSE Liffe, the European derivatives exchange owned by NYSE Euronext.

Last year ICE and Nasdaq OMX jointly launched an $11.3bn hostile bid to acquire and break up NYSE Euronext, but abandoned the deal after US competition regulators threatened to sue to block the potential deal.

ICE will keep the NYSE building on Wall Street but wants to hive-off Euronext’s cash equities businesses, which include the stock exchanges of Paris, Amsterdam, Brussels and Lisbon. The company said it was exploring a listing of Euronext if market conditions allowed and European policy makers supported the offering.

The deal will propel ICE, the 12-year-old exchange that has grown through offering trading in energy, emissions and commodities, into the trading of listed interest rate derivatives, the world’s largest asset class. It will also transform ICE into the third largest operator of futures exchanges, posing a threat to Deutsche Börse and CME Group, ICE’s long-time rival.

“Markets have inherently changed in the face of the global financial crisis,” said Mr Sprecher. “While derivatives markets have become more global . . . many cash and equity markets have become more regional as major European financial institutions turned their focus to capital efficiency and regulatory reform.”

ICE’s ambitious takeover comes ahead of a big shake-up of derivatives trading. In the wake of the financial crisis, global regulators want to push more of the off-exchange derivatives market on to transparent trading venues and have more deals processed through clearing houses. The changes are due to come into effect next year in the US and in about 18 months’ time in Europe.

Under the terms of the deal, ICE has agreed to pay $33.12 per NYSE share in a mixture of cash and shares. The duo said they would have headquarters in Atlanta, where ICE is based, and New York.

NYSE shareholders will have the option of either accepting $33.12 in cash per share, taking 0.2581 ICE common shares or a mix of $11.27 in cash plus 0.1703 ICE common shares, subject to a maximum cash consideration of approximately $2.7bn.

Mr Sprecher will remain chief executive of the enlarged company while Duncan Niederauer, chief executive of NYSE Euronext, will be chief executive of NYSE Group and president of the enlarged company.

Mr Niederauer stands to receive more than $10m if the deal is successful, according to a company filing.

Like all other incumbent exchanges, NYSE has seen its dominant market share and profits from stock trading eroded in recent years by rivals offering faster trading and cheaper prices. NYSE’s combined share trading platform accounts for only about a quarter of all US equity trading, forcing it to focus on European derivatives and IT outsourcing services.

ICE was advised by Morgan Stanley, BMO Capital Markets, Broadhaven Capital Partners, JPMorgan, Lazard, Societe Generale and Wells Fargo, and received legal counsel from Sullivan & Cromwell and Shearman & Sterling.

NYSE was advised by Perella Weinberg, BNP Paribas, Blackstone, Citigroup, Goldman Sachs and Moelis, and received legal counsel from Wachtell, Lipton, Rosen & Katz and Stibbe N.V.

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