ICE to buy NYSE Euronext for $8.2 billion

Thu Dec 20, 2012 6:23pm EST
 
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By John McCrank and Sophie Sassard

(Reuters) - In October, Jeff Sprecher, chief executive of upstart IntercontinentalExchange, approached NYSE Euronext CEO Duncan Niederauer with a modest proposal to team up on clearing trades in London.

As the men continued talking, Sprecher grew bolder, instead suggesting that ICE buy NYSE in what became an $8.2 billion deal announced on Thursday.

The deal will link up two powerful derivatives exchange and clearing house operators, but threatens to further reduce the clout of the New York Stock Exchange. While the New York Stock Exchange has stood for 200 years as an iconic symbol of U.S. capitalism, it is almost an afterthought in this deal.

For ICE, the crown jewel of NYSE Euronext is Liffe, Europe's second-largest derivatives market, analysts said. Niederauer had long felt that NYSE's shareholders did not appreciate the true value of the London-based futures and options exchange, and had talked to bankers about how to improve NYSE's stock price, a person familiar with the matter said.

Liffe will help ICE compete against U.S.-based CME Group, owner of the Chicago Board of Trade. Derivatives trading remains highly profitable for the exchanges, and new rules next year will dramatically expand the demand for clearing over-the-counter contracts.

The stock market businesses are less valuable to ICE. The company said it will try to spin off the Euronext European stock market businesses in a public offering, generating speculation it may also have little interest in the NYSE trading floor. Profits from stock trading have been significantly eroded by new technology and the rise of other places for investors to trade, including venues known as "dark pools."

ICE's Sprecher will be CEO of the combined organization, and the NYSE Euronext CEO will be president, a ceremonial title at many U.S. companies. In an interview, Niederauer said he would remain at least through 2014 as an "important senior member" of Sprecher's management team.

Niederauer will also be CEO of the NYSE Group. The combined company will be based in New York and Atlanta, where ICE is headqurtered.   Continued...

 
Traders work the floor at the New York Stock Exchange in New York December 20, 2012. IntercontinentalExchange agreed a $8 billion deal to buy New York Stock Exchange owner NYSE Euronext on Thursday, propelling the commodities player into the big league of European derivatives and helping it to take on arch rival CME Group. REUTERS/Andrew Kelly