Suitors, Wallflowers Seen In Latest Deal Dance For NYSE

First Published Thursday, 20th December 2012 04:05 pm - © 2012 Dow Jones


By Jacob Bunge

The last time the New York Stock Exchange parent NYSE Euronext (NYX) entertained a suitor, it helped spark a wave of exchange deals and counter-offers that, in general, amounted to little. Will the talks between NYSE and ICE draw in a rival bidder for the Big Board? Here's a look at the sector's biggest companies and consolidators:

CME Group Inc. (CME): The world's largest futures exchange operator, which has long worked to expand overseas, considered jumping into the chase for NYSE Euronext's London futures franchise after the Big Board parent in 2011 announced its intention to merge with Germany's Deutsche Boerse (DBOEF, DB1.XE), according to people with knowledge of the discussions.

CME ultimately held back from joining with Nasdaq OMX Group Inc. (NDAQ) in such an effort over concerns--later justified--that U.S. antitrust authorities wouldn't let Nasdaq OMX take over NYSE's stock markets.

CME has the heft to make a solo play for NYSE, but taking on the securities franchise would mean plunging into a hyper-competitive business and regulation by the Securities and Exchange Commission, a road CME has sought to avoid.

Hong Kong Exchanges & Clearing Ltd. (0388.HK): The Asian titan of the exchange industry, boasting the sector's largest valuation worldwide, for years steered clear of M&A, instead preferring to focus its efforts on laying groundwork to capitalize on listings and trade from the slowly opening Chinese economy.

That changed this year when, faced with slowing activity on its markets, HKEX trumped ICE, CME and NYSE to acquire the London Metal Exchange--veering from both its own aversion to deal making and prior focus on Asia. Owning NYSE would elevate HKEX's ambitions to lead in listings, but would likely draw fire from U.S. politicians wary of selling a touchstone of American capitalism to a foreign-based competitor.

Singapore Exchange Ltd. (S68.SG): SGX CEO Magnus Bocker, a onetime number-two at Nasdaq OMX, knows the stock-trading business and a thing or two about exchange mergers, navigating consolidation of Nordic markets before striking a deal to sell the finished product to Nasdaq in 2007.

But Mr. Bocker also knows how deals can go wrong, with SGX's high-profile takeover of Australian exchange operator ASX Ltd. (ASX.AU) nixed by Aussie authorities in 2011, the first in a crop of blocked tie-ups. Mr. Bocker since then has professed a focus on organic growth in Asia.

Nasdaq OMX: NYSE's archrival faces the prospect of watching the Big Board trade from the sidelines this time, after the U.S. Department of Justice in 2011 ruled that the technology-centric exchange's proposed takeover of its larger rival would create a monopoly over stock-listings and related services in the U.S.

That doesn't mean, though, that Nasdaq OMX--whose CEO Bob Greifeld developed a relationship with ICE CEO Jeffrey Sprecher during the doomed takeover attempt of NYSE--couldn't have his eye on NYSE's European stock-market businesses, which the combined company has said it may spin off.

Deutsche Boerse: The European Union in February ruled against the keystone of the planned NYSE-Deutsche Boerse merger, the combination of the two companies' interest-rate futures franchise, and as a result the companies abandoned their combination rather than proceed without the deal's core.

Though Deutsche Boerse has challenged the EU view in court, executives have disavowed any plan to resurrect a deal with NYSE. However, the German exchange heavy could be interested in any European businesses hived off in an ICE-NYSE tie-up.

London Stock Exchange Group PLC (LSE.LN): The LSE led off the 2011 wave of exchange deals with an [unsuccessful] plan to merge with Canada's TMX Group Ltd. (X.T), and after that deal fell through LSE Chief Xavier Rolet settled for an acquisition of London-based clearinghouse operator LCH.Clearnet, which elevated the LSE to the tier of exchanges that own their own trade-processing facilities.

Likely too small to mount a solo push for NYSE, LSE remains locked in negotiations to close and integrate its LCH deal--which have lately been complicated by regulators.

Write to Jacob Bunge@Jacob.Bunge@dowjones.com

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