Deutsche Boerse, NYSE Offer Dividend to Win Takeover Support

Tuesday, 07 Jun 2011 01:42 PM

 

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Deutsche Boerse AG and NYSE Euronext pledged to pay a one-time dividend as they seek shareholder approval for a takeover that would create the world’s largest exchange company.

The payout totals about 620 million euros ($910 million), equivalent to 2 euros per Deutsche Boerse share or $1.37 per NYSE share, the bourses said in a statement today. Deutsche Boerse also plans to buy out Eurex, which it owns jointly with SIX Group AG, operator of the Swiss stock exchange, the Frankfurt-based company said in a separate statement.

Deutsche Boerse agreed to buy NYSE Euronext, owner of the New York Stock Exchange and the Liffe derivatives market, for $9.53 billion in February. An obstacle to the merger was removed last month when IntercontinentalExchange Inc. and Nasdaq OMX Group Inc. dropped their competing offer after the U.S. Department of Justice threatened an antitrust lawsuit.

The special dividend “is a sign of the new holding company’s intention to pursue both shareholder value creation and prudent capital management policies,” Reto Francioni, chief executive officer of Deutsche Boerse, said in the statement.

Deutsche Boerse needs 75 percent of shareholders to approve its purchase of NYSE Euronext by July 13. The special dividend will only be paid to those who tender their stock, according to today’s statement. NYSE Euronext requires investors holding at least 50 percent of its shares to vote in favor of the bid.

‘Reluctant to Tender’

“The requirement that shares to be tendered to qualify for the special dividend could encourage Deutsche Boerse shareholders that may have been reluctant to tender or undecided until now,” Niamh Alexander, a New York-based analyst at Keefe Bruyette & Woods Ltd., wrote in a note to investors.

The combined exchange should save more than 51 million euros by having common trading and clearing infrastructure, combining networks and “eliminating overlapping IT functions,” they said June 1 to shareholders in Eschborn, Germany for Deutsche Boerse’s annual investor day. The two companies plan a “further refinement of corporate functions” and a “central European market operations hub for cash, derivatives and clearing.”

Deutsche Boerse’s works council, which represents the company’s employees, has urged shareholders to reject the takeover. Many cross-border deals have destroyed value for shareholders and Germany’s importance as a financial center will diminish if the deal goes ahead, the council wrote in a letter.

Eurex Control

Deutsche Boerse today said it will take complete control of Eurex, Europe’s largest futures market, by buying out Zurich- based SIX Group. Deutsche Boerse owns 50 percent of Eurex at present and gets 85 percent of its revenue and profit.

The Swiss exchange will get 295 million euros in cash and the same amount in shares of the combined Deutsche Boerse-NYSE entity, the companies said. The deal is due to close in 2012 and Deutsche Boerse “expects an immediate net income accretion.” If the buyout had been completed in the first quarter of 2011 it would have boosted income by 15 million euros, according to the statement.

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