12.13.2011

More Concessions for NYSE-DB

12.13.2011
Terry Flanagan

NYSE and Deutsche Borse will look to keep their merger on track by offering up additional concessions.

A month after NYSE Euronext and Deutsche Borse turned in their initial concessions to the European Commission regarding their proposed merger, the parties submitted additional revised remedies to address any remaining concerns.

Under the new set of concessions, NYSE and Deutsche Borse have “improved” on their existing remedies by including all of their NYSE Liffe-operated European single equity derivatives business, including those in Amsterdam, Paris, Brussels and Lisbon. They will also offer to whoever ends up purchasing the single equity derivatives business access to Eurex Clearing.

As part of the new remedy proposal, the deadline for the European Competition Commission to complete its review has been extended to Feb. 9, with the parties expecting to close the deal shortly after that.

It is unclear if NYSE and Deutsche Borse would be willing to offer up any additional substantial concessions aside from what has already been proposed. The merger parties have made it clear that it would no longer make sense for them to pursue the deal if they were asked to give up too much.

NYSE and Deutsche Borse agreed to their $17.7 billion merger in February, with shareholders approving the deal in July. Regulators outlined their objections in a statement in early October, with oral hearings held later that month. Their initial batch of remedies was submitted in mid-November. The companies expect to save as much as $3 billion in capital requirements through the deal, as well as reduce any duplicative infrastructures and operations.

“Geographic consolidation will ultimately end in cost-savings and efficiencies for customers, which will be good for continuity,” said Bryan Johanson, managing director with NYSE Euronext, regarding the transaction.

Aside from the European Competition’s concerns, the deal also faces another hurdle from the regional regulator for Frankfurt’s Deutsche Borse.

The Hessian Ministry of Economics is a local regulator in Deutsche Borse’s home state of Hesse. On Monday, the ministry’s Ulrike Franz-Stoecker said that they have “legal reservations” about the deal, and submitted a list of suggested amendments and concessions to the merger partners to help rectify their concerns. No other details regarding their issues with the deal have been released. NYSE and Deutsche Borse will have a chance to respond to the Hessian authority.

The Hessian Ministry of Economics has the power to revoke Deutsche Borse’s operating license, which would essentially kill the deal. It has also stated that it would make its final decision after the European Competition Commission gives its verdict.

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