Deal to create world’s largest exchange group falls apart after year of negotiations with regulators
The European Commission (EC) definitively killed off the proposed merger between NYSE Euronext and Deutsche Börse yesterday after a year-long saga that included a failed counter-offer by rival NASDAQ for the NYSE, similarly turned down by US regulators.
The proposed $9 bn merger would have created a ‘quasi-monopoly’ in European financial derivatives, the EC says in a statement issued in Brussels.
‘These markets are at the heart of the financial system and it is crucial for the whole European economy that they remain competitive,’ says commission vice president Joaquín Almunia. ‘We tried to find a solution, but the remedies offered fell far short of resolving the concerns.’
Deutsche Börse: 'A black day'
In a hastily arranged press briefing in Frankfurt where he took no questions, Deutsche Börse CEO Reto Francioni said the decision marked ‘a black day for Europe and for its future competitiveness in global financial markets.’
He also said the decision represents ‘a missed opportunity for Frankfurt’ to become a global financial center on equal footing with New York.
He added that the commission’s decision was based on ‘an unrealistically narrow definition of the market that does no justice to the global nature of competition.’
Definition of market key
That view is echoed in a statement issued by NYSE Euronext’s chairman Jan-Michiel Hessels, who says the EU’s decision ‘is based on a fundamentally different understanding of the derivatives market’.
He adds that the NYSE ‘would not agree to any concessions that would compromise or undermine the industrial and economic logic of the proposed combination.’
Both officials emphasize that their organizations are focused on moving forward with their independent growth strategies. The two exchange groups refused to publicly comment beyond their prepared statements.
NASDAQ's view
NASDAQ’s CEO Bob Greifeld was asked about the EC ruling in the bourse’s Q4 conference call with investors yesterday.
He said the merger proposal failed, as did NASDAQ’s earlier combined $11 bn bid with IntercontinentalExchange to acquire Deutsche Börse, because they were unable to overcome monopoly concerns of regulators with a broader definition of the markets.
‘This deal did not succeed because they were not able to successfully redefine what the market is,’ Greifeld said.
‘We do not believe this ruling will preclude other large exchange deals from happening [if the market overlap is not as great as it was with the NYSE and Deutsche Börse].’
