Euronext Rejects New German Offer As Merger Plans Heat Up

The New York Stock Exchange (NYSE) on Monday offered to pay about $10 billion (7.8 billion euros) for the Euronext stock exchange. The latter's supervisory board has already backed the deal, saying that it was more "attractive" than a counter-offer by German stock exchange Deutsche Börse.

Deutsche Börse meanwhile suffered a new blow Tuesday in its long-running attempt to woo Euronext, when the pan-European stock market operator publicly snubbed its renewed advances in favor of a tie-up with the New York Stock Exchange.

Shortly after Deutsche Börse revealed the financial terms of
its merger offer, Euronext curtly dismissed the deal. "This is the same offer that we received over the weekend and which was fully considered by the board yesterday," Euronext finance chief Serge Harry said. Euronext's supervisory board said on Monday that the NYSE's bid was more attractive than Frankfurt's.

The German bid is a combination of shares plus two billion euros ($2.6 billion) in cash, with analysts estimating the total
value of the deal at 8.6 billion euros. For its part, the NYSE has laid $10.2 billion on the table for Euronext, also in a mix of cash and shares.

Euronext shareholders will now meet in Amsterdam on Tuesday to discuss a potential merger or takeover.

Should Euronext and NYSE come together, they would form the world's largest stock exchange that's three times bigger than its closest competitor. About 3,800 companies with a combined worth of roughly 19 trillion euros would be listed at the new exchange.

Strategy, not synergy most important

Euronext is already Europe's largest international stock exchange and includes the Amsterdam, Brussels, Lisbon and Paris stock exchanges as well as the London futures market. The Italian stock exchange could follow soon.

While NYSE officials hope for synergy effects of around 293 million euros, analysts believe that strategic advantages are much more important. While NYSE head John Thain would push his company towards market leadership, Euronext's Jean-Francois Theodore would likely no longer be able to control things from Paris, said Dieter Kuckelkorn of the Börsen-Zeitung in Germany.

A merger of the two companies would also affect Deutsche Börse: Since US technology exchange Nasdaq is eyeing a takeover of the London Stock Exchange, Deutsche Börse officials were trying to create a counterweight within continental Europe and might not be able to do so now.

Germany left out in the cold

"Should Euronext merge with NYSE, Germany will be left out in the cold," said Wolfgang Gerke, a professor of banking and stock trading at the University of Erlangen-Nuremberg.

Investors seem to think so, too: On Monday, Deutsche Börse shares dropped 5 percent, becoming the biggest loser in Germany's stock index, DAX.

"Germany had concentrated too much on London," Gerke said, referring to previous plans by Frankfurt to take over the London rival. "Frankfurt should have started talking to New York much earlier."

Franco-German rivalries

While Euronext isn't a French company, it is currently led from Paris. That's why the German merger plans have been eyed with suspicion. The Germans tried to compromise, offering to move stock trading to Paris while heading the futures market in Frankfurt and London and establishing headquarters in the Netherlands.

While Euronext will also become a junior partner in a merger with NYSE, "this would make the French the most important partner for the US," Gerke said. "And they prefer that to being second in Europe."