Germany’s Deutsche Boerse AG and NYSE Euronext confirmed Wednesday
that they were in advanced discussions to combine their operations, a
union that, if consummated, would create the world’s largest exchange
operator. Investors cheered the announcement, noting that the
talks were driven by a desire to save money and build a transatlantic
powerhouse across markets for stocks, futures and options. Shares of
NYSE Euronext and Deutsche Boerse both jumped Wednesday after trading
was halted temporarily due to the news. Any proposed deal will face intense regulatory scrutiny on both sides
of the Atlantic. Experts say U.S. regulators may be reluctant to see
the New York Stock Exchange, perhaps the ultimate symbol of American
finance, bought by a European company. At the same time, European
regulators could try to block the transaction on the grounds that it
will create a near-monopoly player in the region’s futures markets. In
a joint statement, the two companies carefully described the potential
deal as a “combination,” but it looks more like an acquisition. If it
passes muster with regulators, the all-stock transaction would create a
new entity in which Deutsche Borse’s shareholders hold about 60 per cent
of the equity. “Strategically, this deal makes a lot of sense,”
wrote Chris Allen, an analyst at Evercore Partners, in a note to clients
Wednesday. The two companies expect to shave €300-million
($409-million) from their annual costs, or about 14 per cent of total
expenses, he said. The new company would bring together two of the
four largest stock trading platforms in Europe and play a dominant role
in the continent’s derivatives markets. It would also capture almost
half of the U.S. trading in options. Such heft, in theory, will help the
two companies fend off smaller challengers that have eaten into their
businesses. “You can’t control [trading] volumes or the economic
climate, but you can take out costs and do strategic stuff to grow,”
says Jamie Selway, managing director at Investment Technology Group,
Inc. in New York. Duncan Niederauer, the chief executive officer
of NYSE Euronext, who would retain that role in the combined business,
has a reputation as a savvy manager who is pushing ahead into new
trading arenas opened up by regulatory changes. Whether regulators
will actually derail the deal remains to be seen. The firms have been
down this road before, holding talks in 2008 and 2009. The fact that
discussions have reached such an advanced stage indicates the two
companies have resolved the disagreements that plagued earlier rounds.
One reportedly centred on where the new entity would be based; the firms
said Wednesday it would have dual headquarters in Frankfurt and New
York while being incorporated in the Netherlands. Another unresolved
question: what to call the new company. A deal could come quickly,
possibly as soon as next week, reports suggest. Wednesday’s
announcement that there was “no agreement had a lot of specifics in it,”
noted Mr. Selway wryly.
" USD- Initial jobless claims drops to levels last seen 3 yrs ago .."..
" the labor market is improving ".....
The number of people applying for unemployment benefits plunged last
week to the lowest level in nearly three years, boosting hopes that
companies will step up hiring this year as the economy strengthens. Applications sank by a seasonally adjusted 36,000 to 383,000, the lowest point since early July 2008. A slowdown in firings means U.S. companies may begin
creating enough jobs to keep unemployment going down after the
rate’s biggest two-month decline since 1958. Federal Reserve
Chairman Ben S. Bernanke yesterday said the jobless rate will
likely stay high “for some time” as companies remain reluctant
to add to payrolls.
“The labor market is improving,” said Brian Jones, an
economist at Societe Generale in New York who projected claims
would drop to 385,000. “Fingers crossed, if the weather can
hold off this week, we should get a pretty decent snap back in
non-farm payrolls and maybe another drop in the jobless
rate.”
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