NYSE Euronext, Deutsche Boerse cancel merger deal

(NEW YORK) - Deutsche Boerse and NYSE Euronext cancelled their mega-merger Thursday after European regulators vetoed the deal.

The decision to abandon the plan to create the world's largest exchange operator potentially dominating the global derivatives trade was expected after the European Commission on Wednesday rejected it.

"NYSE Euronext announced today that in light of the decision by the European Commission to block the proposed merger agreement, both companies have agreed to a mutual termination of the business combination agreement originally signed by the companies on February 15, 2011," NYSE Euronext said in a brief statement.

The European Commission said Wednesday it had "no alternative" but to veto the transatlantic tie-up, billed as a merger but which would have left the German side dominant in the combined company.

The EC had expressed worries that it would have had monopolistic power in certain derivatives trading.

But NYSE Euronext and Deutsche Boerse had refused recommendations to hive off some of the business that the merger would have covered.

"We could only have allowed a merger if the parties had offered sufficient remedies" to regulator worries, the European Union's senior competition regulator Joaquin Almunia said on Wednesday.

"Unfortunately they only offered remedies limited in their scope," he said.

Well-steeled in advance for losing the chance to become the world's biggest market operator, Deutsche Boerse said Wednesday the decision showed the EU was "out of touch with reality."

"This is a dark day for Europe and its future competitiveness on global financial markets," it raged.

Deutsche Boerse chief Reto Francioni called the decision "inconsistent with and even contradictory to the Commission's stated aim of expanding regulation on the over-the-counter derivatives market."

NYSE Euronext, which includes the New York Stock Exchange and exchanges in Paris and Amsterdam, said the EC decision was "based on a fundamentally different understanding of the derivatives market."

"As we made clear throughout this process, we would not agree to any concessions that would compromise or undermine the industrial and economic logic of the proposed combination," said NYSE Euronext chairman Jan-Michiel Hessels.

In pursuing the deal, the two had to fend off a competing $11.3 billion bid by the Nasdaq and ICE exchanges for NYSE Euronext, which they had said valued NYSE Euronext at nearly 20 percent more than the German suitor's valuation.

But that aggressive bid was ultimately scotched when US regulators signaled they would oppose it on anti-trust grounds.

Analysts say Deutsche Boerse is better positioned than its US counterpart, anyway, because it is active across the whole range of activities, from its Xetra electronic stock-trading platform, to its Eurex derivatives market and its Luxembourg-based clearing subsidiary, Clearstream.

Deutsche Boerse generates just 12 percent of its revenues from the highly competitive, low-margin stock-trading activities, while in the case of NYSE Euronext it accounts for around half of overall business.

Shares in NYSE Euronext were up 1.25 percent in early trade Thursday after losing 0.5 percent Wednesday on the EC rejection of the deal.

In Frankfurt Deutsche Boerse shares rose 2.1 percent.

Rival US derivatives and commodities exchange operator CME meanwhile saw its share price jump nearly five percent on the news.

Commission prohibits proposed merger 
between Deutsche Börse AG and NYSE 
Euronext - guide