Monday, June 19, 2006

Suitors spar over Euronext's hand in merger.

Deutsche Borse has made a new advance in its bid to untie a merger agreement between NYSE and Euronext. The German exchange's latest proposal centered on key concessions that would keep a certain portion of Euronext's autonomy and clearing operations intact. From FT.com via MSNBC:

The latest offer includes three significant concessions, one of which is integration of Deutsche Börse's information technology business into Euronext's.

Deutsche Börse also agreed that after a merger only German equities would be cleared through its Eurex subsidiary, leaving current Euronext clearing services in the hands of its LCH.Clearnet platform.

Thirdly, Deutsche Börse tried to address fears that the merger would get bogged down in scrutiny from European Union competition authorities by seeking advance clearance of the deal.

Deutsche Bourse has not offered any added financial incentive with their latest offer, though Deutsche Borse chairman Kurt Viermetz said their bid could be increased as a "final option".

NYSE chief John Thain insists that a merger with the NYSE would be the better option for Euronext. He also raised the possibility that NYSE Group might set up a London exchange of its own or aquire the London Stock Exchange should Euronext fail to deliver the level of business it expects from international share listings.

With the current flap over the possibility of US regulatory creep into foreign markets, I have to wonder how feasible the strategy of setting up an NYSE-sponsored London exchange would be. NYSE swooping in to buy the LSE might prove a more likely option, given NASDAQ's recently weakened financial condition. Nasdaq's credit rating was cut to junk status in May amid debt burdens and questions over the reasoning behind its attempt to gain a strategic interest in the LSE. Still, concerns over spread of Sarbanes-Oxley style regulations persist.