NYSE Euronext believes that any kind of merger with Nasdaq OMX — whether the Big Board were the buyer or the seller — makes little strategic sense, and antitrust regulators would block it, according to a source close to the company.
Bringing the top two U.S. stock exchanges together would face "insurmountable antitrust problems," the source said Wednesday, suggesting NYSE's board could look beyond the premium Nasdaq has offered and reject Nasdaq's bid outright.
The focus on monopolies shows just how tricky it will be for the world's top exchange operators to pull off a rash of planned tie-ups that would revamp capital markets in North America, Europe and Asia. Just this week, Australia moved to block a buyout of its bourse by Singapore Exchange.
Last week, Nasdaq and IntercontinentalExchange complicated the web of merger plans with an $11.3 billion bid for NYSE Euronext, topping a friendly $10.2 billion offer made by Germany's Deutsche Boerse.
A counterbid by NYSE for Nasdaq is "absolutely not under consideration," the source close to the NYSE said, knocking down a media report earlier this week that the exchange operator was considering such an unusual and aggressive move.
A spokesman for the New York Stock Exchange parent company backed that up, saying Wednesday: "NYSE is not considering a counterbid for Nasdaq." He did not comment on how NYSE views Nasdaq's unsolicited bid.
Meanwhile, Deutsche Boerse has no plans to raise its bid for NYSE Euronext, a separate source familiar with the talks said Wednesday.
All eyes will be on the NYSE board, which is set to meet within a week to decide whether Nasdaq's bid is superior to the one made by Deutsche Boerse in February.
Nasdaq's plan, if it could be completed, would lead to massive job losses in New York City and destroy value for NYSE Euronext shareholders, said the first source.
The sources requested anonymity because the talks are not public.
Combining Nasdaq and the NYSE would bring the top two U.S. stock exchanges together with a virtual monopoly on listings, and dominance in trading U.S. cash equities and options. Deutsche Boerse's plan would create the world's top financial exchange reliant on the more profitable derivatives trading.
NYSE's board will review Nasdaq's unsolicited offer based on its value and any risks that it will not ultimately close, including the threat regulators would block it.
"'Insurmountable' is probably an overstatement. But there is substantial antitrust risk," said Jonathan Grossman, an antitrust lawyer at Cozen O'Connor in Washington, D.C.
"If the price difference doesn't justify the risk of the U.S. antitrust regulators objecting to the transaction, then it may very well be a rational decision on their part to reject the Nasdaq/ICE offer," he said of the board members.
The board plans to meet before April 14, but no firm date has been set, a third source said.
Antitrust concerns and nationalism have emerged as tall hurdles for the handful of pending bourse takeovers. Underscoring the latter, Australia's government said Tuesday it intended to block SGX's bid for exchange operator ASX Ltd on "national interest" grounds.
On Wednesday, Australia Treasurer Wayne Swan described the approval process as fair and transparent, and attempted to tamp down growing criticism that the country was not open to foreign investment.
Nasdaq shares were up 3.4 percent at $28.94 Wednesday afternoon, while NYSE were up 1.4 percent at $39.54. Deutsche Boerse shares closed up 1 percent at 52.10 euros in Frankfurt.
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