Intercontinental Exchange to Buy NYSE for $8.2 Billion

The 12-year old energy and commodity futures bourse, IntercontinentalExchange Inc., an Atlanta based company, has decided to buy NYSE Euronext for stocks and cash worth $8.2 billion. Hence, IntercontinentalExchange will now acquire control over the biggest equities market in the world. Per share, a price of $33.12 will be paid by Intercontinental Exchange to the owners of NYSE. The price is 38% more than NYSE’s yesterday’s closing price. The proposal from IntercontinentalExchange has already been approved by NYSE boards and the transaction is expected to complete by June, 2013. Incidentally, in 2011, a joint bid made by NASDAQ OMX Group and IntercontinentalExchange to acquire NYSE was denied as many feared that the two would dominate US stock listings.

After the transaction is complete, the Chief Executive Officer of IntercontinentalExchange is going to head the combined company as well. The CEO of NYSE, Duncan Niederauer will become the new President of the combined company. As confirmed by Duncan Niederauer, the discussion for this takeover started on October and they are currently seeing through the chances of an initial public offering for the European equities unit of NYSE.

Thomas Caldwell, the Chief Executive Officer and Chairman of Caldwell Securities stated that the NYSE is constantly losing volume and hence the margins are also getting squeezed. This is mainly because of the competitors having different corporate structures. Thomas added that NYSE people sits and hopes that cash equity volumes will pick up; however, the same may not happen even for several years.

The shares of NYSE Euronext have increased by 34% and are at $32.25 now. The market value of the same is now set at $7.8 billion therefore. On the other hand, IntercontinentalExchange surged by 1.4% as well and each share is priced at $130.10 currently. The capitalization of IntercontinentalExchange is now at $9.5 billion.

Under the takeover agreement, a shareholder of NYSE can either take the $33.12 in cash per share or 0.2581 IntercontinentalExchange share. If both the options don’t seem good enough, shareholders can opt for a mixed one as well: 0.1703 of IntercontinentalExchange share and $11.27 in cash.

The expectations are set for raising $450 million in estimated savings within 2 years of completion of the transaction. In addition, NYSE Euronext and IntercontinentalExchange expect to increase the overall earnings by at least 15% within the very first year of joint operation.