In an effort to restructure its business operations,
NYSE Euronext Inc.
) intends to vend of its 4.79% stake in India-based
multi-commodity exchange - MCX Stock Exchange (MCX), according to
Reuters. The company expects to earn about $45 million from the
In Jun 2008, NYSE had bought about 5% holding in MCX for about
$44 million. However, the MCX business is not generating healthy
returns for NYSE due to weak market response from the
Hence, the company has pegged to sell about 2.44 million
shares that it owns in MCX between $18.4 and $18.8 per share. At
the higher end, this sums to about $45 million. On Mar 7, the
shares of MCX closed at about $18.85 in India.
The latest sale is an effort undertaken by NYSE to simplify
its business by shedding off non-core assets, particularly in the
wake of the ongoing merger deal with
). NYSE may not want to repeat the mistake of being disliked by
the regulators, which happened during the failed merger deal with
Frankfurt-based Deutsche Boerse last year.
The company is looking forward to ward off all kinds of
probable difficulties that could raise questions among regulators
in the current deal with IntercontinentalExchange. Amid this, an
inflated debt position and lack of any strong growth catalyst
further impel NYSE to strategize its business operations as well
as lower its operating and capital costs.
Moreover, the ongoing market volatility, currency fluctuations
and intense global competition has been weighing on the trading
volumes, a key revenue source for NYSE, over the past several
quarters. Restricted top-line growth has also been nibbling into
the earnings and margins of the company. The financial services
technology sales are also experiencing a challenging period.
Although NYSE is yet to confirm reports on the sale of the MCX
stake, we believe a business restructuring to concentrate on core
efficiencies and retain market share in such operations appears a
reasonable point of action for the company. A risky financial and
operating leverage could also shake investor confidence, and call
for an appropriate check and control processes
While NYSE carries a Zacks Rank #3 (Hold), other outperformers
of the financial sector include
Fleetcor Tech Inc.
) all ofwhich carry a Zacks Rank #1 (Strong Buy).
FLEETCOR TECH (FLT): Free Stock Analysis
INTERCONTINENTL (ICE): Free Stock Analysis
MOODYS CORP (MCO): Free Stock Analysis Report
NYSE EURONEXT (NYX): Free Stock Analysis
VANTIV INC-A (VNTV): Free Stock Analysis
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