In Dec 2012, ICE agreed to buy out NYSE for the current value of about $9.7 billion. While initially the deal was scheduled to close in the first half of 2013, delays in regulatory and other approvals deferred the culmination period to the end of this year.
However, 99% of the voters, who account for 64% of the shares outstanding of NYSE, approved of the merger deal. Consequently, the 13-year old ICE has moved one step ahead to take over 220-year old NYSE through the shareholder approval.
Although NYSE enjoyed a dominant position in the US for most of its life, intense competition and market volatility in the past few years have shrunk the company’s market share from over 90% to less than 30% now. Hence, a merger at this juncture appears feasible for this business.
Overall, the merger benefits both the parties with incremental cost efficiencies, business expansion and competitive edge. Meanwhile, ICE plans to keep the NYSE brand post merger.
Regulatory Approval a Major Hurdle to Pass
Nevertheless, the deal is yet to sail through the high tides set by regulators in both the US and Europe. The European regulators have already shown concern over the interconnection of the commodities business of both the parties that could deter healthy competition.
While a roar of merger and acquisition activities took place in most of 2011 and 2012, hardly any of them saw the light due to regulatory snags, reflecting the significance of the regulatory processes. In the past, the London Stock Exchange failed to take over Canada’s TMX Group and Singapore stock exchange was also unable to acquire the Australian stock exchange owing to opposition from regulatory authorities in both the countries.
Even Frankfurt-based Deutsche Boerse’s attempt to take over went south due to regulatory hurdles. Nasdaq OMX Group Inc. (NDAQ) and ICE premium-priced joint takeover bid was also repeatedly rejected by NYSE on multiple antitrust issues.
Hence, while the shareholders of both the companies have showed confidence in the merger, it would be too early to predict the successful culmination considering the regulatory processes.
While NYSE carries a Zacks Rank #3 (Hold), ICE sustains a Zacks Rank #2 (Buy). Another outperformer of the exchange industry includes CBOE Holdings Inc. (CBOE), which carries a Zacks Rank #1 (Strong Buy). However, Nasdaq holds a Zacks Rank #4 (Sell).
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