Nasdaq and its partner in the $11.3 billion hostile bid, futures market Intercontinetal Exchange, appear to outclass their German counterpart, whose February offer valued the Big Board's parent company at $9.5 billion. The Nasdaq-ICE deal amounts to $42.50 in cash and stock, while Deutsche Boerse's all-stock offer comes to $35.04 a share. That's a lot of financial reach for the Germans to make up. Said one stock analyst said in sizing up the clash:
[NYSE Euronext] shareholders will make a tough choice and take the higher offer. The next step will be a reaction by Deutsche Boerse, but it's unlikely that Deutsche Boerse will come up with a higher offer now; currently, I see Nasdaq is ahead.
I don't see how Deutsche Boerse can make its offer more attractive -- it was a merger offer and not a takeover bid, and they offered the maximum they could offer and still had to pass a number of obstacles.Like U.S. lawmakers waving "Old Glory" in questioning a European play for an icon of American capitalism. Nasdaq CEO Robert Greifeld is predictably playing up this element of the deal, saying today that "a vast majority of developed countries have a strong national exchange, a cornerstone of their economies" (and by the way, don't mention the war.)
ICE hit the same theme in its announcement of the bid. The Atlanta-based company noted that in 2010 the U.S. generated only 16 percent of capital raised worldwide and attracted only one of the 10 largest global IPOs (General Motors (GM)). Since 1995, listings on U.S. exchanges have also decreased significantly while nearly doubling non-U.S. exchanges. Securities trading growth in Asia-Pacific is expected to surpass growth in Europe and the U.S. for years to come.
Bad deal for shareholders?
Where Deutsche Boerse may have an advantage, interestingly, is among penny-pinching Nasdaq shareholders. Nasdaq and ICE are proposing to carve up NYSE Euronext. The former would get the target's equity and options trading, and technology businesses; the latter would get its derivatives operations. That's a lot of beer nuggets to pay for part of a company, especially since the acquisition would swell Nasdaq's debt, which already tops $2 billion.
"It could bring about a higher risk because there is more leverage and debt. There are more [issues] to consider. If the leverage is not handled properly, the future of our financial capital markets is at stake," says Richard Repetto, analyst with Sandler O'Neill + Partners in New York.One other thing. If Nasdaq does knock out Deutsche Boerse, say auf wiedersehen to lots of jobs here in the States, since the deal would unite two leading U.S. exchanges. As far as employees are concerned, "synergy" is just another word for pink slip.
Sorry, which side are we rooting for again?
Thumbnail from Flickr user Minimalist Photography