The New York Stock Exchange would no longer be an independent company with the planned acquisition of NYSE Euronext by IntercontinentalExchange (ICE) for about $8.2 billion.
The deal – announced on Thursday – leads to many benefits for both companies, such as more efficiency and future growth, as newer technology is changing the way stocks are bought and sold.
It also allows for “emphasis on market safety and security via high-performance, integrated technology infrastructure,” the companies said in a joint statement.
Once complete, the new company will include 14 exchanges and five clearinghouses. The NYSE Euronext brand will be retained, as will the NYSE building in lower Manhattan.
The deal has been approved by the boards of both companies, and is expected to officially close in the second half 2013. But it still needs regulatory approvals in Europe and the United States, and approval by shareholders.
There likely would be less risk for regulatory issues with the sale since ICE focuses on energy futures trading, not a dominant sector for NYSE Euronext, according to The Wall Street Journal.
NYSE Euronext is more focused on stocks and stock-options trading.
The deal is divided between 67 percent shares of stock and 33 percent in cash. With the value of shares at $33.12, it is a 37.7-percent premium over the NYSE Euronext’s closing share price on Dec. 19.
"Our transaction is responsive to the evolution of market infrastructure today and offers a range of growth opportunities, while enhancing competition in US and European markets and broadening our ability to address new markets and offer innovative products and services on a global platform," ICE CEO Jeffrey C. Sprecher said in the company statement. "We believe the combined company will be better positioned to compete and serve customers across a broad range of asset classes by uniting our global brands, expertise and infrastructure. With a track record of growth and returns, clearing and M&A integration, we are well positioned to transform our combined companies into a premier global exchange operator that remains a leader in market evolution."
ICE and Nasdaq had offered significantly less money for NYSE Euronext about two years ago – in a deal which never was completed.
“The Board of NYSE Euronext carefully considered a range of strategic alternatives and concluded that ICE is the ideal partner for NYSE Euronext in an evolving market landscape," said Jan-Michiel Hessels, chairman of the Board of NYSE Euronext.
ICE's market capitalization is about $9.3 billion, compared with NYSE Euronext's at $5.8 billion, The Journal said.
ICE operates regulated futures exchanges and over-the-counter markets for agricultural, credit, currency, emissions, energy and equity index contracts.
NYSE Euronext is an operator of financial markets and provider of trading technologies. Its equities markets – the New York Stock Exchange, NYSE Euronext, NYSE MKT, NYSE Alternext and NYSE Arca – represent one-third of the world’s equities trading.
The company also provides commercial technology, connectivity and market data products and services via NYSE Technologies.
In understanding the need for the deal, analysts looked at the changing role of the NYSE. For example, The Daily Beast reported “technology has slowly eroded the business model and primacy of the NYSE” over the past 40 years.
With the Nasdaq, buyers and sellers meet online. “It became the destination of choice for technology companies, many of which have risen from tiny start-ups to the world’s largest: Microsoft, Google, Apple, and Intel,” the source said. “Meanwhile, technology enabled the rise of discount brokers, and the trading of stocks in increments of decimal points rather than fractions. ... As was the case with so many other businesses, it turned out that machines could do the job more quickly and cheaply.”
There were more technological advances in the last 10 years, such as alternate electronic stock exchanges, like BATS.
“These upstarts appealed to the high-frequency traders who have come to dominate the market,” The Daily Beast added. “The action in today’s market is no longer about a savvy mutual fund working with a specialist to place orders for a block of shares, and relying on a trusted hand to do so without tipping off the market. Now it’s computers, run by algorithms, trading hundreds of shares – hundreds of times per minute – on a range of exchanges.”
Edited by Braden Becker