Shareholders in the NYSE and the European stock market Euronext are to vote this week on a trans-Atlantic wedding in the face of some concern in Europe that the NYSE will be the dominant partner.
Euronext groups the stock markets in Paris, Brussels, Amsterdam and Lisbon and the Liffe financial futures market in London. Its shareholders are to vote on the alliance in Amsterdam tomorrow.
Shareholders in the NYSE will vote in New York on Wednesday.
The boards of the two markets signed an agreement in principle on June 1 under which the NYSE was valued at US$28.8 billion and Euronext at about US$13.7 billion.
The marriage was presented as a "merger of equals," but a report, strongly critical of the deal, published by an association of financial interests in France called Paris Europlace, said that the marriage amounted to a takeover by the NYSE.
The courting was carried out under great pressure of consolidation in the business of running stock markets which, today, are based on electronic trading platforms and complex computerized processing systems.
Users of stock markets want the cost of transacting deals to fall. To achieve this, markets must increase business to reduce the unit costs of transactions. And the markets, like any business, are keen to expand their market reach.
The main competitor for the NYSE in the US, the NASDAQ technology market, is trying to acquire the London Stock Exchange. The two futures markets in Chicago have decided to link up.
For the last two years in Europe, Euronext, the German Deutsche Boerse and the London Stock Exchange have courted, jilted and manoeuvred but have not become engaged.
Under the terms of the NYSE-Euronext plan, the new entity would be based in the US and US interests would dominate the executive board and about 60 percent of the capital.
But the president of the NYSE, John Thain, faced with objections from Europe that the deal was unbalanced, agreed last month that the seats on the supervisory board should be shared equally between US and European interests.
In addition, a foundation is to be set up in the US to protect the Euronext markets from interference by US regulators. The possibility of strict US regulations being applied to trading in Europe is one of the main concerns to European businesses which use Euronext.
The main shareholders in Euronext are investment funds based in English-speaking countries. The NYSE, by taking these steps, hopes to ensure that support for the alliance is widespread among Euronext shareholders who stand to make big capital gains if the deal is approved.
One of the funds with shares in Euronext, TCI which owns 10 percent of the business, wanted Euronext to tie up with Deutsche Boerse in which it is the majority shareholder. But the other funds in Euronext have avoided making any complaints about the NYSE-Euronext plan.
Last month, Deutsche Boerse withdrew from bidding for Euronext, leaving the way open for the NYSE.
At brokers Exane BNP Paribas, analyst Elie Darwish said: "The prospects for a bidding war had faded away totally."
So the way seems clear for the NYSE.
French banks that are shareholders in Euronext take different views of what the stock market should do and they have put an end to a shareholder pact they formed at the beginning of the year.
They will therefore vote as they see fit, but since they hold only about 11 percent of the shares in Euronext, their influence is limited.
Thain has expressed confidence that shareholders in the NYSE will approve the plan, which has been presented in the US as being of great strategic importance for the firm.
The takeover would give the NYSE access to a platform for the trading of shares in foreign companies, beyond the reach of tough US market regulations. He also expects to make savings through economies of scale amounting to US$375 million per year from 2009.
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