Nasdaq retreat from NYSE bid opens way for Deutsche Boerse

By Joern Bender and Daniel Schnettler May 16, 2011, 16:32 GMT

New York/Frankfurt - The retreat Monday by US technology stock index Nasdaq from its takeover bid for the New York Stock Exchange (NYSE) has cleared the way for Deutsche Boerse to push forward with its fusion plans.

Nasdaq and its partner IntercontinentalExchange (ICE) withdrew after advice from US competition regulators.

'We took the decision to withdraw our offer when it became clear that we would not be successful in securing regulatory approval for our proposal despite offering a variety of substantial remedies,' said NASDAQ OMX chief Bob Greifeld.

Nasdaq's hostile offer for NYSE had endangered the mooted merger of the New York-based exchange with Deutsche Boerse. Had it gone through, it would have created a dominant US-based stock exchange.

Throughout the whole process, NYSE has stated it was against a merger with Nasdaq and preferred to join up with Deutsche Boerse. Such a merger would create the world's largest stock market with headquarters in New York, Frankfurt and other European capitals.

The fusion is expected to be completed by the end of the year, but will have to clear hurdles before then.

The news was likely well received by Reto Francioni, head of the Deutsche Boerse, although there was no official comment on Monday.

Last week, Francioni told a major gathering of Deutsche Boerse stockholders that the mega-fusion provided a 'once in a lifetime chance,' a 'new dimension' and a 'quantum leap.' After an hour-long speech, the Swiss financier humbly lowered his tone and said: 'Now the decision is with you, most honoured stockholders.'

Deutsche Boerse stockholders have until July 13 to exchange their holdings for the new merged firm. At least three-quarters must do so in order to complete the merger. Stockholders of the NYSE have until July 7 to vote on the merger at a special meeting. A 50-per-cent vote is enough for approval.

From the German side, little opposition is expected. Stockholders did not voice criticism at the recent meeting, and instead of critical questions about the merger, major issues centred on the women's quota in management and other issues.

In Europe, it's rather the anti-trust officials and financial overseers who must be convinced. In addition to Frankfurt, after the merger only London will remain as a major financial center on the continent. The stock markets in Paris, Amsterdam or Lisbon already belong to the New York Stock Exchange, which fused years ago with Euronext.

But even these hurdles appear to be surmountable. Analyst Christian Muschick of the Investmentbank Silvia Quandt is convinced that the merger has 'as good as happened.' But there are some components which are hard to predict: The concern of many Americans is the prospect of the iconic New York institution to become a subsidiary of the German operation. Even simple things like the choice of the name for the new mega exchange will become a political theme.

US Senator Charles Schumer has already started lobbying against the disappearance of the iconic identity of the NYSE. The New York Stock Exchange is the penultimate symbol of the country's financial strength. Schumer has already enlisted US Treasury Secretary Timothy Geithner for his campaign, thus increasing pressure on US anti-trust officials and financial regulatory agencies as they consider approval for the merger.

The appointment of NYSE head Duncan Niederauer to head the new mega exchange could be seen as a concession to such patriotic hesitations. The majority of the stockholders of the new exchange will also come from the anglo-American region. But the German side will have tghe main say on the operating board at least until 2016.

In the end, however, even US patriots will not be able to avoid the reality that the world of stock trading is increasingly international. Companies merge worldwide to save costs. Deutsche Boerse head Francioni answers such questions briskly: 'We are convinced that we will get broad support.'

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