Euronext holders back NYSE deal
PARIS – The New York Stock Exchange and Euronext NV cleared the biggest remaining obstacle in the path of their planned $14.3 billion combination, as the European bourse’s shareholders on Tuesday voted overwhelmingly to back the deal.Barring a surprise rejection by the NYSE Group Inc.’s shareholders, who vote Wednesday, the Euronext meeting sets the stage for the creation of the world’s largest stock exchange operator by market capitalization and the first trans-Atlantic equities market.”We will be by far the leading exchange in the world,” said Euronext chief executive Jean-Francois Theodore, who is to stay on as deputy CEO of the combined company headed by NYSE boss John Thain.NYSE Euronext will stay on the lookout for new allies, Theodore told shareholders shortly before the vote. “Being at the forefront of the stock-exchange business, we could also play a part in a second round of consolidation.”Exchanges worldwide are anxious not to be left behind in the rush for partners. The Nasdaq Stock Market Inc. has amassed a 29 percent stake in the London Stock Exchange Group PLC and launched a hostile bid for the rest earlier this month.Technological advances have multiplied incentives to team up, increasing demand for round-the-clock intercontinental trading as well as the savings on offer and the threat from new entrants. Seven leading investment banks announced plans Nov. 15 to set up their own European equities trading platform.The Euronext meeting was a test for the NYSE deal, which had drawn criticism from investors who feared U.S. regulatory encroachment on European turf and from those who had backed a rival, unsolicited bid from Deutsche Boerse AG, abandoned last month.The Frankfurt exchange’s withdrawal, combined with new assurances from Euronext, NYSE and public officials to corral the waverers behind the trans-Atlantic plan. The U.S. company’s agreed offer to acquire Euronext for cash and stock was endorsed by more than 97 percent of voting rights represented at the meeting, where turnout was 65 percent.The NYSE and Euronext – which operates the Paris, Amsterdam, Brussels and Lisbon stock exchanges – expect to complete their tie-up in the first quarter of 2007, subject to the NYSE vote and formal regulatory clearance. The U.S. Securities and Exchange Commission and Euronext’s five European regulators have already given tentative approval.Euronext’s Theodore on Tuesday resisted demands for specific performance targets, besides the $100 million in annual savings already identified. NYSE and Euronext expect “an increase in revenue, a decrease of costs and an increase in profit,” he said.Some investors said they voted for the combination despite misgivings.”As shareholders we have mixed feelings,” said Erik Breen, head of corporate governance for Rotterdam-based asset management firm Robeco, which had opposed the NYSE deal before changing its mind hours before the meeting.”The governance of the new entity on balance is weaker,” said Breen, who advises several of the Netherlands’ biggest pension funds with a combined 3 percent stake in Euronext. Among concerns, he cited larger shareholder majorities needed for big decisions and doubts about the accountability of the new 22-seat board.Euronext chairman Jan-Michiel Hessels, named to stay on as chairman of NYSE Euronext, said the new voting rules were intended to set a “high hurdle” for any changes to the balance of power within the combined company.The size of the board may eventually be reduced, he added.In a concession announced last month following criticism from European politicians and business groups, the new board will be split evenly between U.S. and European directors. Under the original proposal, Europeans would have been outnumbered by 12 to 10.U.S. officials including Treasury Secretary Henry Paulson have also pledged that the tie-up will not expose European-listed companies to American regulations or lawsuits. The SEC will echo those assurances in an agreement to be signed with European regulators.Dutch Finance Minister Gerrit Zalm, who had threatened to block the tie-up, said in a letter published Monday that he would raise no objections, providing U.S. regulatory “overspill” could be ruled out. That condition was credited by Breen for Robeco’s last-minute decision to vote in favor.French business organization Paris Europlace, another former critic that backed the NYSE-Euronext deal in the days preceding the vote, also vowed Tuesday that it would stay “vigilant” to make sure these and other commitments were respected.Euronext shares rose as much as 3 percent after the vote before giving up most of their gains to end at 91.25 euros ($119.49) in Paris, up 0.7 percent on Monday’s close. In New York, shares of NYSE Group Inc. were little changed at $101.81 (77.75 euros).—Associated Press Writer Arthur Max in Amsterdam contributed to this report.
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