Nasdaq OMX Group was unbowed Monday after NYSE Euronext's board rejected its takeover offer in favor of a lower bid from Deutsche Boerse, while the German company looked set to stand pat as the battle for the Big Board intensified.
Nasdaq and partner IntercontinentalExchange Inc are not about to walk away from their $11.3 billion unsolicited offer, and they are working behind the scenes to persuade NYSE shareholders to pressure the exchange's directors, according to people familiar with the matter.
Deutsche Boerse, which in February struck a $10 billion friendly deal to acquire NYSE Euronext, has no plans to raise its offer, two other sources said. On Sunday, NYSE's board rejected the Nasdaq-ICE bid as "strategically unattractive, with unacceptable execution risk."
The maneuvering points to a lengthy, public, and likely bitter fight for the parent company of the venerable New York Stock Exchange, which also runs stock and futures markets across Europe.
Shareholders at the center of it all braced for a possible bidding war, with some suggesting Nasdaq and ICE first need to counter the NYSE board's unanimous and harshly worded rejection of its offer.
"The NYSE has taken the first step, and that is casting doubt. Nasdaq has got to convince people that this combined NYSE-Nasdaq combo is going to be a real winner and a powerhouse," said Thomas Caldwell, chairman and founder of Toronto-based Caldwell Investment Management Ltd.
"It is really early on in this contest. There's lots of time for mischief," said Caldwell, who with the funds his firm manages holds more than $100 million in NYSE Euronext stock.
NYSE Euronext is the biggest of the takeover targets now in play as many of the world's exchanges, including the London Stock Exchange and Canada's TMX Group, look to band together.
CIRCLING APRIL 28
After the rejection, Nasdaq and ICE reaffirmed their bid and chided NYSE for not discussing it further with them.
They are now trying to influence an annual meeting on April 28 in which NYSE shareholders are set to vote on their directors, said one of the sources, who requested anonymity. They hope institutional shareholders can convince the NYSE board to talk to them about the offer.
NYSE Euronext Chief Executive Duncan Niederauer said in an interview Sunday that he had not talked to his counterparts at Nasdaq and ICE since they first informed him of their offer on April 1. He described the bid as hollow and undefined, adding it would unacceptably carve up his company.
That response appears to be enough for Deutsche Boerse, at least for now.
The operator of the Frankfurt stock exchange is preparing to file an offer document with German regulator BaFin as early as Tuesday, said the two people familiar with Deutsche Boerse's thinking.
After that, Deutsche Boerse will go on a roadshow as it seeks to convince NYSE shareholders that a deal between Frankfurt and New York is the best offer, these people said.
Deutsche Boerse Chief Executive Reto Francioni, who would be chairman of the combined company, and other executives are set to visit New York this week, said Niederauer, who would be CEO after the tie-up.
Deutsche Boerse declined to comment.
Deutsche Boerse shares rose as investors saw the chances of a bidding war between rival suitors diminished. The stock was up 0.9 percent in Frankfurt. NYSE Euronext shares fell 2.3 percent and Nasdaq OMX shares slipped 1.6 percent, handing back some of the big gains they made when Nasdaq announced its bid.
Though NYSE's board argued the Deutsche Boerse tie-up jibes with the company's long-term plan, some observers said the higher bid from Nasdaq and ICE could sway shareholders focused on a short term gain.
"We don't think many investors will find the differences in strategic vision, financial leverage, employment targets etc, as sufficient reasons to decline the nominally superior Nasdaq ICE offer," Edward Ditmire, analyst at Macquarie, wrote in a note.
That offer would give NYSE Euronext's stock, options and technology businesses to Nasdaq, while ICE would get its profitable derivatives operations centered in London.
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