Hours after the stock exchanges in London, Toronto, Montreal and Milan said they would merge, the Deutsche Börse AG and NYSE Euronext Wednesday confirmed are trying to marry.
This could set the stage for three cross-atlantic mergers to be announced in one week.
First is the “all-share merger of equals” between the LSE Group, operator of the London Stock Exchange and Borsa Italiana, and TMX Group, operator of the Montreal and Toronto stock exchanges.
Second would be the Deutsche Borse and NYSE Euronext merger that is “in advanced discussions,’’ the two companies said just before noon New York time Wednesday.
Third would the merger of BATS Global Markets, the Kansas City exchange operator, and Chi-X Europe, the pan-European trading “facility” which has become the prime electronic challenger to the LSE. BATS, which operates the BYX and BZX exchanges in the United States and BATS Europe, started exclusive talks to take over Chi-X Europe in December. The exclusivity runs out Friday, putting pressure on BATS, which trails Chi-X in Europe, to complete its bid in the next two nights.
Deutsche Borse and NYSE Euronext said their combination would create “a group that is both a world leader in derivatives and risk management and the premier global venue for capital raising.”
They cautioned that completion of an agreement is not assured.
But they were detailed about the possible result, saying the transaction, like the LSE-TMX deal, would be completed in an all-stock exchange. And that the combined firm would operate under a new legal entity incorporated in the Netherlands.
Most notably, Deutsche Borse shareholders likely would have majority control of the combined firm. Deutsche Börse shareholders would hold approximately 59 to 60%, and NYSE Euronext shareholders would hold approximately 40 to 41%, of the combined company’s equity, the firms said.
The combined group “would be the world’s largest exchange operator by revenues and profit,’’ with dual headquarters in New York and Frankfurt. Chairman would be DB’s Reto Francioni, based in Frankfurt, and CEO would be Duncan Niederauer, based in New York.
An executive committee would be created, with members “drawn equally from the current leadership of both companies.’’
The two firms would save about $400 million in operating costs, from economies of scale in information technology, clearing operations, market operations and corporate center functions. And they expect to boost combined revenues in clearing services, new products and cross-selling between stocks and derivatives.