Specialists work at their posts on the floor of the New York Stock Exchange Thursday, June 28, 2012. (AP)
After being "the face of capitalism" for more than 200 years, the iconic New York Stock Exchange (NYSE) will sell for approximately $8 billion to “upstart” rival IntercontinentalExchange Inc. (ICE).
ICE and NYSE Euronext, the group that runs the NYSE, announced the deal Thursday. All that’s left is for market regulators to approve the purchase.
“The buyer … made clear Thursday that little would change for the trading floor in Manhattan's financial district if regulators approve the deal,” the Associated Press notes.
ICE announced that it would open an office in Manhattan and that NYSE CEO Duncan Niederauer will become president of the conglomerate and CEO of NYSE Group. ICE also said that it hopes the purchase will “create a top exchange operator covering a diverse lineup of markets and boosting efficiency.”
The floor of the New York Stock Exchange is empty of traders, Monday, Oct. 29, 2012, in New York. All major U.S. stock and options exchanges were closed during Hurricane Sandy. (AP)
"We believe the combined company will be better positioned to compete and serve customers across a broad range of asset classes by uniting our global brands, expertise and infrastructure," said IntercontinentalExchange Chairman and CEO Jeffrey Sprecher.
"Our transaction is responsive to the evolution of market infrastructure today and offers a range of growth opportunities, while enhancing competition in U.S. and European markets and broadening our ability to address new markets and offer innovative products and services on a global platform," he added.
Along with Sprecher keeping his positions, four NYSE board members will be added to ICE’s board, boosting its ranks to 15.
“Investors can opt for all cash, or 0.2581 IntercontinentalExchange common shares for each NYSE Euronext share or a mix of $11.27 in cash plus 0.1703 ICE shares,” the Wall Street Journal explains.
“The deal is subject to a maximum cash consideration of $2.7 billion, as ICE said it will pay out about 67% in shares and 33% in cash as part of the deal,” the report adds.
So far, the bought-out exchange’s stock is happy with the announcement: NYSE’s stock increased 31 percent to $31.51 in trading after markets opened.
However, oddly enough, ICE's stock fell $1.14 to $127.17.
The Atlanta-based “upstart” explained that it will fund the cash portion of its acquisition with a combination of cash and existing debt, adding that the acquisition of NYSE will help “cut costs and should increase its earnings more than 15 percent in the first year after the deal closes.”
Pending regulatory approval, both companies expect the deal to close in the second half of next year.
But perhaps the purchase of the NYSE shouldn’t come as that big of a surprise. Indeed, as several reports note, there have been numerous attempts at merges recently as “competition intensifies and commissions decline.”
“Expect more and more forced, unforced, voluntary and otherwise mergers, as trading volume collapse to levels not seen since the mid-1990s,” Zero Hedge warns. “Sadly, there is just not enough money for everyone who continued to expect the 2000s trading volume trendline to continue in perpetuity.”
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