Tags: EU | Decision | NYSE | Merger

EU Said to Prepare Draft Decision on NYSE-Deutsche Boerse Merger

Friday, 30 Dec 2011 02:43 PM

 

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European officials may distribute as soon as next week a recommendation on Deutsche Boerse AG’s planned takeover of NYSE Euronext, people familiar with the discussions said.

The European Commission team examining the case indicated at a meeting on Dec. 21 that they are likely to propose prohibiting the deal, according to two people familiar with the situation, who declined to be identified as the conversations were private. The advice is non-binding.

NYSE and Deutsche Boerse have been trying to convince European regulators that merging to create the world’s largest exchange operator won’t stifle competition in derivatives and clearing. Officials told the companies at last week’s meeting in Brussels that concessions they offered didn’t go far enough to allay their concerns, two people familiar with the talks said at the time. The last day the commission can rule is Feb. 9.

The companies still have room to maneuver. Before deciding whether to approve or block a deal, the European Commission must consult competition agencies from the European Union’s 27 member nations. Commissioners from each EU country must also vote on a decision and companies can appeal a merger ban at the EU courts. Companies, including Oracle Corp., have managed to complete deals to which the European Commission had initial objections.

James Dunseath, a London-based spokesman for NYSE Euronext, and Joe Hennon, a spokesman for the European Commission, declined to comment. Heiner Seidel, a spokesman for Deutsche Boerse in Frankfurt, did not immediately respond to requests for comment.

U.S. Approval

U.S. regulators agreed on Dec. 22 to allow Frankfurt-based Deutsche Boerse’s purchase of NYSE as long as the company sells its 31.5 percent stake in another U.S. equity market, Direct Edge Holdings LLC.

Scrutiny of the proposed acquisition has been greater in Europe, where the merger would unite the region’s two biggest derivatives exchanges, NYSE’s Liffe and Deutsche Boerse’s Eurex. In the U.S., trading in interest-rate, agricultural and commodity futures is dominated by one company, CME Group Inc., after it merged with the Chicago Board of Trade in 2007 and the New York Mercantile Exchange in 2008.

Cap Fees

European antitrust officials had previously indicated the companies would have to divest an entire derivatives business such as Liffe or Eurex, something the chief executive officers of both exchanges they aren’t prepared to consider, according to people familiar with the matter. Instead, NYSE and Deutsche Boerse offered to cap fees on derivatives trading and clearing for three years, sell the Liffe single-stock derivatives business and license the Eurex trading system to a third party, two people familiar said.

The takeover would put more than 90 percent of the region’s exchange-traded derivatives market and about 30 percent of European stock trading in the hands of one company. Eurex is the region’s biggest derivatives exchange and Liffe is the second- largest.

The European Commission broke for holidays on Dec. 23 and returns Jan. 2.


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