Nasdaq and ICE Make Hostile Bid for NYSE Euronext

The Nasdaq OMX Group & the IntercontinentalExchange announced an $11.3 billion cash-and-stock bid for NYSE Euronext on Friday, seeking to derail the Massive Board operator's designs to merge with Deutsche Börse.

Their long-awaited offer formally sets off a fight for NYSE, as exchange operators around the globe seek merger partners to better compete on a worldwide scale.

The Nasdaq-ICE deal would merge the six largest stock exchange operators in the United States, making a brand spanking new national champion for stock listings at a time when American markets fear losing ground to foreign rivals. It would also shore up Nasdaq's business, which has been fending off upstart competitors like Bats & DirectEdge that promote their high-speed electronic trading systems.

The bid today is entirely consistent with our long-stated objective of matching massive scale with extreme efficiency, Robert Greifeld, Nasdaq's chairman & chief executive, said on Friday in a conference call with analysts. This plan recognizes the global nature of the listing competition. Nasdaq & ICE collectively expect about $740 million in cost savings six years after the deal closes, a figure driven by cutting jobs & eliminating duplicate back-end systems. Nasdaq designs to close either NYSE's information middle or its own.

Under the terms of the bid, Nasdaq would take over the Massive Board & other domestic stock-related businesses, while ICE would acquire NYSE's derivatives unit, known as Liffe. The combined Nasdaq NYSE would be called Nasdaq NYSE Euronext & would maintain both the Massive Board's famed floor operations & Nasdaq's own electronic trading platform.

Not only are the synergies more significant, & theres more money composition. But they think they can generate a company that better competes in today's markets, Jeffrey C. Sprecher, ICE's chairman & chief executive, said on the call.

Under the terms of their bid, Nasdaq & ICE would pay $42.50 for each NYSE share, consisting of $14.24 in money, 0.4069 shares in Nasdaq & 0.1436 shares in ICE. The offer trumps Deutsche Börse's $35.29-a-share all-stock bid & is 27 percent higher than NYSE's share cost on Feb. 8, the day before it disclosed merger talks with the French market operator.

NYSE said in a statement that it would review the Nasdaq-ICE proposal.

Nasdaq began thinking about a feasible counterbid soon after NYSE disclosed negotiations with Deutsche Börse, quickly hiring advisers & reaching out to potential merger partners like ICE & the CME Group, according to people briefed on the matter. It had also thought about taking part in the separate merger of the London & Toronto stock exchanges.

Nasdaq & ICE spent weeks negotiating an agreement over how to carve up NYSE. Mr. Greifeld was the more aggressive of the chief executives in pushing for a deal, & he worked to persuade Mr. Sprecher of both the necessity for a counterproposal & the likelihood that they could win.

The bid may be the largest check yet for Mr. Greifeld & Mr. Sprecher as deal makers. Both Nasdaq & ICE have struck a lot of deals over the last two years, & Nasdaq in particular has been praised by analysts for its ability to quickly digest its acquisitions & reap cost savings.

What they have been working on over the past month is spending an amazing amount of time together, trying to understand the business they would be obtaining, Mr. Sprecher said.

But both Mr. Greifeld & Mr. Sprecher have at least one prominent deal failure. Nasdaq unsuccessfully sought to acquire the London Stock Exchange, though it sold its holdings in the British company at a profit, & ICE lost a race to buy the Chicago Board of Trade to CME.

Shares in Deutsche Börse. closed on Friday at 52.81 euros, or $74.83. Shares in NYSE jumped 12.6 percent, to $39.60, while Nasdaq stock rose 9.25 percent, to $28.23. Shares in ICE fell 3.1 percent, to $119.75.

Nasdaq & ICE are hoping in part to seize on fears that NYSE's deal with Deutsche Börse. will erode New York's standing as a worldwide financial capital.

Several lawmakers have said that they are worried about a French company taking over an American financial icon, & Senator Charles E. Schumer of New York has implied that his support for that deal depends in part on retaining the NYSE name as part of the newly combined company.

Nasdaq & ICE must contend with their own numerous hurdles, including probable antitrust concerns over combining the six largest stock market operators in the United States. It may also generate fears about job losses, given that both NYSE & Nasdaq are based in New York City.

Deutsche Börse & NYSE have argued that theirs is a merger of equals, with top management drawn from both sides of the Atlantic & dual headquarters in Frankfurt & New York City. Reto Francioni of Deutsche Börse. would become chairman of the new company, while Duncan Niederauer of NYSE would take the chief executive role.

Then there's the financial ramifications.

I'm concerned about how this deal affects jobs in New York, Senator Schumer said in an e-mail. I have asked Mr. Greifeld & Mr. Sprecher to send me details on the jobs impact of their proposed deal & what ramifications it would have for the New York work force.

In the event that they succeed, Nasdaq & ICE would need to split a roughly $355 million breakup fee payable to Deutsche Börse, what Mr. Greifeld called a generous gift. Neither he nor Mr. Sprecher elaborated on how the six companies would decide how much of the fee each would pay.

The deal, which the companies will pay for with existing money & $3.8 billion in financing, would also burden Nasdaq with additional debt. Its books are already saddled with $2.2 billion in debt.

Nasdaq OMX has a track record of successfully integrating acquisitions, but the proposed transaction is of such a size, scope & visibility that it will without a doubt present unique execution challenges, Peter Nerby, a Moody's senior vice president, wrote in a research note.

Moody's Investors Service downgraded the outlook for Nasdaq's credit standing to negative from stable on Friday, citing the debt the company would take on from the transaction.

Nasdaq is being advised by Bank of The united states Merrill Lynch, Evercore Partners & the law firm Shearman & Sterling. ICE is being advised by Lazard, Broadhaven Capital Partners, BMO Capital Markets & the law firm Sullivan & Cromwell.

Mr. Greifeld said he expected to quickly pay down the debt load with the money generated by the newly combined company. Afterward, Nasdaq designs to pay out dividends & buy back stock.