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NYSE pushes back against reports of merger rejection

by Renee Cordes  |  Published January 10, 2012 at 3:49 PM
NYSE Euronext on Tuesday, Jan. 10, underscored that it had not yet received any official decision by the European Commission with regard to its planned tie-up with Deutsche Börse AG, with Feb. 9 still standing as the deadline for the in-depth competition review.

The exchange operator issued a statement in response to media reports published late Tuesday European time. Citing two people involved in the process, the Financial Times reported that EU Competition Commissioner Joaquín Almunia has recommended blocking the transaction, dealing a "serious blow" to the controversial merger.

NYSE Euronext's five-paragraph statement emphasized that nothing had yet been decided. "NYSE Euronext has not yet received any official decision by the European Commission regarding the requested merger of both companies," it said, adding that it cannot comment on speculation.

"The proposed merger aims to create a regulated, highly liquid and integrated European market for stock and derivatives trading as well as clearing and settlement, thereby contributing to the stability, integrity and transparency of the European financial markets," the NYSE statement said.

European Union policy calls for the Competition Commission recommendation to be presented to the entire 27-member European Commission, which is obliged to consult with competition regulators from all 27 EU member states before it reaches a final decision.

Rejecting a Commission competition proposal is not commonplace. But Diego Perfumo, an analyst with Equity Research Desk in Greenwich, Conn., suggested that if Almunia does in fact issue a formal proposal to reject the merger, it's not assured that a majority of 27 EU commissioners will endorse the decision. "On the political front, continental Europe may welcome a combination to create a champion exchange to better compete with CME," he said, though he also acknowledged that U.K. politicians have opposed the deal to protect London's financial center position against a stronger continental EU exchange.

Company officials were unable to confirm reports of a planned meeting in New York Wednesday between Reto Francioni and Duncan Niederauer, the CEOs of Deutsche Börse and NYSE, respectively, to discuss their merger.

In mid-December, to win over the support of competition regulators, the companies offered to sell additional single-equity derivatives assets, as well as give the purchaser of those activities an option to access Eurex Clearing AG for single-equity derivatives. Eurex Group is Europe's largest derivatives exchange, jointly operated by Deutsche Börse and SIX Swiss Exchange. Their original remedy package called for NYSE Euronext to sell its European single-derivatives activities except for those in Paris, Amsterdam, Lisbon and Brussels, where its German partner would give up its respective activities.

The companies said in mid-December that they expect to close the deal in early 2012 after the EC completed its review.

-- Suzanne Miller contributed to this report.
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Tags: Deutsche Borse | European Commision | M&A | NYSE

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