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ICE's $8.2B NYSE Tie-Up to Help Iconic Exchange Evolve

Proving that the round of exchange consolidation that took place just a few years ago wasn't quite complete, Atlanta-based IntercontinentalExchange (ICE) on Thursday said it plans to acquire the New York Stock Exchange (NYSE) in a deal valued at $8.2 billion. ICE executives pointed out that the deal, if consummated, would bring little change to the iconic Manhattan trading floor.

ICE said the stock and cash acquisition of NYSE Euronext will create a "premier global exchange operator" diversified across markets including agricultural and energy commodities, credit derivatives, equities and equity derivatives, foreign exchange and interest rates. In addition, with advanced clearing capabilities, the combined company will be "well positioned to deliver efficiencies while serving customer demand for clearing and risk management globally."

Unanimously approved by the companies' boards, the transaction is currently valued at $33.12 per NYSE Euronext share, or about $8.2 billion, based on the closing price of ICE's stock last Wednesday (Dec. 19).

ICE CEO Jeffrey C. Sprecher said the deal is in response to "the evolution of market infrastructure today" and that it will offer a range of growth opportunities while enhancing competition in U.S. and European markets and broadening ICE's ability to address new markets and offer innovative products and services on a global platform.

"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," he said. "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."

During a conference call, Sprecher said the acquisition will "unlock significant value" and grow ICE's businesses to a larger extent than either of the companies could have done independently. "Upon closing, we will operate 14 regulated exchanges and five clearing houses, and we're acquiring important new markets at an attractive time in the business cycle."

ICE said it is committed to preserving the NYSE Euronext brand and will maintain dual headquarters in Atlanta and New York. New York headquarters will be in the Wall Street building, home to the NYSE trading floor. In addition, ICE will open a new midtown Manhattan office in June. ICE also committed to maintaining the position of NYSE Liffe in London as a international market operator for derivatives products, including its benchmark interest rate complex. It also intends to explore an initial public offering of Euronext as a Continental European-based entity following the closing of the acquisition -- if market conditions and European policy makers support the offering.

"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 NYSE Euronext Chairman Jan-Michiel Hessels.

NYSE Euronext CEO Duncan L. Niederauer said the deal positions the business for solid long-term growth and development. "We are bringing together two highly complementary businesses, creating an end-to-end multi-asset portfolio that will be strongly positioned to serve a global client base and capture current and future growth opportunities," he said. He noted during the conference call that the NYSE has been dealing with the reality that the global marketplace is transitioning to a "new normal" environment, which has included reduced capital levels, or risk appetite, or a shift in the balance of power of liquidity suppliers, or significant regulatory and operational changes facing businesses.

"While the industry is facing increasing competition from alternative venues that are less transparent and operate under fewer regulatory requirements than we do, we continue to see increased demand for global market infrastructure services, capital raising ability and risk management services," he said. "This will continue to drive our business forward. Quite simply, the market is evolving quickly and in a time of regulatory transformation, being nimble and responsive when risk management is critical for the derivatives markets."

Sprecher will continue as chairman and CEO of the combined company, and Scott A. Hill will be CFO. Niederauer will be president of the combined company and CEO of NYSE Group. Four members of the NYSE Euronext board will be added to the ICE board, which will be expanded to 15 members.

The last six years has seen a number of mergers and acquisitions within the trading exchange space. In 2007, ICE completed its $1 billion-plus merger with the New York Board of Trade, the 100-year-old open outcry exchange for sugar, coffee, cocoa, cotton and other commodities and financial products (see NGI, Jan. 15, 2007). In August of that year ICE acquired the Winnipeg Commodity Exchange. During 2007 and 2008, ICE's chief rival, CME Group, acquired the Chicago Board of Trade and the New York Mercantile Exchange in an effort to provide customers access to all major benchmark asset classes, including interest rates, equity indexes, foreign exchange, energy, agricultural commodities and metals (see NGI, Sept. 1, 2008).

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