Nasdaq faces hurdles in winning NYSE, say experts

By Reuters
Posted March 16 at 9:35 a.m.

Nasdaq OMX Group Inc.’s possible counterbid for NYSE Euronext faces some big hurdles, including funding a complicated deal and convincing Big Board shareholders that it’s better than Deutsche Boerse’s offer, experts said.

Nasdaq is moving closer to making a bid to trump Deutsche Boerse’s more than $9 billion deal for NYSE Euronext, but it must first find $5 billion of debt financing.

Any rival offer would also have to account for a relatively steep 250 million euro ($347.5 million) termination fee on the NYSE-D.Boerse deal.

The exchange would also need to team up with the IntercontinentalExchange Inc (ICE.N) which would look to buy NYSE Euronext’s lucrative interest-rate future’s business, a source familiar with the situation said on Monday.

A Nasdaq offer could value NYSE Euronext between $10 billion and $13 billion, with Nasdaq paying $5 billion to $7 billion of the price, another source briefed on the situation said.

Negotiations were going on about the value of different pieces of NYSE that ICE and Nasdaq would buy as well as other deal terms, the sources said, declining to be named because these discussions are private.

Nasdaq’s board is expected to meet on Tuesday to discuss its options, one of the sources said.

NYSE Euronext’s shares closed at $37.02, higher than the implied deal price of around $36, suggesting that the market expects a rival offer. The implied value is based on 261.2 million NYSE shares and 195 million D.Boerse shares, according to Reuters data.


On Tuesday morning at an industry conference in southern Florida, the news of a possible Nasdaq deal was center stage, as executives and regulators tried to parse out what motivates ICE CEO Jeffrey Sprecher and Nasdaq CEO Robert Greifeld.

“These guys are deal guys. But the odds of this succeeding are really low,” said Joe Gawronski, president at Rosenblatt Securities, an agency broker that does a lot of research on market structure.

“Hostiles are particularly tough in the exchange industry,” he said.

Nasdaq could make a rival offer this week, although the situation is still in flux, according to the source.

Even friendly mergers have proven difficult to pull off in an industry in which exchanges are proud national symbols, and when politicians and regulators can block them.

“There is an outside risk, or concern, that our capital markets are controlled by non-U.S. companies. It’s a small concern, but it’s out there,” said Gerry Corcoran, CEO of Chicago broker RJO Futures.

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