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ICE to buy NYSE Euronext in $8.2 bln deal, to create "premier global exchange operator"

Last updated: 13:23 20 Dec 2012 GMT, First published: 14:23 20 Dec 2012 GMT

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IntercontinentalExchange (NYSE:ICE), or ICE, has agreed to buy exchange operator NYSE Euronext (NYSE:NYX) for $33.12 US per share in stock and cash, in a deal valued at $8.2 billion. 

The companies said the acquisition combines "two leading exchange groups to 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."

Last year, the 12-year old ICE, principally an energy and commodity futures exchange, and Nasdaq OMX teamed up to take a run at the NYSE, but the takeover was blocked by the U.S. Justice Department over antitrust issues. 

ICE said it intends to explore an IPO of Euronext as a continental European-based entity following the close of the acquisition, if market conditions warrant and if European policy makers support the deal. 

The 220-year old NYSE is an equity, equity options and fixed income derivatives market operator. NYSE Euronext’s equities markets – the New York Stock Exchange, NYSE Euronext, NYSE MKT, NYSE Alternext and NYSE Arca – represent one-third of the world’s equities trading, the most liquidity of any global exchange group. 

It also operates NYSE Liffe, the world’s second-largest derivatives business by value of trading. Its market cap is still $5.9 billion, compared to ICE's $9.3 billion.  

The price of $33.12 represents a 37.7% premium over NYSE Euronext's closing share price on Wednesday. Its shares rose more than 39 per cent before the bell on Thursday, to $33.5. 

"Our transaction is responsive to the evolution of market infrastructure today and offers a range of growth opportunities, while enhancing competition in US and European markets and broadening our ability to address new markets and offer innovative products and services on a global platform," said ICE chairman and CEO Jeffrey C. Sprecher. 

"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."

Under the agreement, which has unanimously been approved by both boards, NYSE Euronext shareholders will have the option to choose $33.12 in cash, 0.2581 ICE common shares or a mix of $11.27 in cash plus 0.1703 ICE common shares, subject to a maximum cash consideration of about $2.7 billion and a maximum of around 42.5 million ICE common shares. 

The overall mix of the $8.2 billion merger consideration being paid is around 67% shares and 33% cash. 

The companies said that NYSE shareholders will own around 36% of ICE shares after the deal. 

ICE noted in its statement that the cash portion of the deal will be funded by a combination of cash on hand and existing credit facilities. 

The majority of run-rate expense synergies of $450 million are expected to be achieved in the second full year post-closing, the parties said. The deal is also expected to add to earnings by more than 15% in the first year after close. 

ICE said that once the deal is closed, it plans to adopt a dividend policy that will provide for an annual dividend payment of around $300 million.

The deal is expected to wrap up in the second half of next year, subject to regulatory approvals in Europe and the U.S., as well as to approval by shareholders of both companies. 

ICE said it will maintain dual headquarters in Atlanta and New York, and will also open a new midtown Manhattan office in June 2013. The company said it is also committed to maintaining the position of NYSE Liffe in London as "a leading international market operator for derivatives products, including its benchmark interest rate complex."

NYSE Liffe execution and clearing will be merged into ICE Clear Europe.

“This transaction leverages the strength of our iconic brand and the value we have created in our global equity and derivatives franchises – positioning the business for solid long-term growth and development,” said CEO of NYSE Euronext, Duncan L. Niederauer. “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.” 

ICE's Sprecher will continue as chairman and CEO of the combined company, while Niederauer will become president of the entity and CEO of NYSE Group. 

Four members of the NYSE Euronext board will also be added to ICE's board, which will be expanded to 15 members.

ICE's shares gained more than 5% in pre-market trade, to $134.76. 

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