Nasdaq OMX
(
NDAQ
) and Intercontinental Exchange (
ICE
) this morning submitted a counter bid for NYSE Euronext (
NYX
) valuing the firm at around $11.3 billion based on current stock
prices and equating to a $42.50 stock price for NYSE. NYSE
announced in February that Frankfurt's Deutsche Boerse AG offered
to acquire the firm in a transaction that would give Deutsche
Boerse shareholders 60% ownership of the new company.
We currently have a
$25.87 price estimate for Nasdaq OMX
and a
$34.77 value for NYSE
prior to the acquisition announcements.
Price Was Main Delay in Submitting the Bid
Nasdaq and ICE agreed on the basic structure of the deal weeks
ago where Nasdaq would acquire NYSE's stock trading and listing
business while ICE would get the derivatives trading business based
in London. The bid from Nasdaq and ICE took some time as reports
circled that ICE felt less urgency to bid for NYSE, and the pair
wanted to see if anti-trust concerns would surface in Europe
relating to NYSE and Deutsche Boerse's potential deal.
One of the biggest points of concern for ICE and Nasdaq was the
price that they would need to pay for NYSE Euronext. They had
tentatively agreed to pay more than $40 a share or $10.5 billion
for NYSE Euronext but some analysts predicted that they would
need to pay at least $43 a share if they want to have a chance at
winning this bid. Deutsche Boerse's bid for NYSE Euronext values
the company at around $35.75 a share. Today's bid of $42.50 might
just do the trick and values the firm at a 19% premium to the
Germans' bid and a 27% premium to NYSE's "unaffected" price on
February 8.
See our full analysis for Nasdaq.
How NYSE Could Provide Value to Nasdaq?
NYSE is the world's leading operator in stock trading and
listing and provides trading platform and services for trade
execution of stocks listed on its exchanges - NYSE, NYSE Arca, NYSE
Amex as well as for the orders that are routed to other market
centers for execution. In 2010, it controlled nearly 26% of the
cash equity trading market in the U.S. If Nasdaq acquired NYSE, it
would become the leader in the cash equity trading market in the
U.S. with about 44.6% market share.
A rise in trading volume will significantly proportional reduce
costs for Nasdaq because it already has the
technological infrastructure in place to carry out large
trading volumes. Both ICE and Nasdaq have made acquisitions in the
past and were able to cut operating expenses significantly. We
estimate that Nasdaq's operating margin for its U.S. cash equity
trading division could reach around 14% in 2011 from 10.3% in 2010
as IT cost savings and business synergies help improve its
profitability.
See our full analysis for NYSE.