NYSE-Deutsche Börse Merger: What's in a name?

One of the big stories that has dominated headlines in the world of business in recent times is the proposed merger between NYSE Euronext and the Deutsche Börse. The merger, if completed, would result in the creation of the world’s largest stock exchange operator. The deal, however, has faced quite a few roadblocks since it was announced in February this year.

A major quarter from which the proposed merger is facing roadblocks is the political sensitivity of the name of the combined exchange. Certain politicians have raised concerns regarding the possibility of the New York Stock Exchange, long considered as a bastion of American capitalism, shifting base to Europe. A significant degree of attention has been focused on the name and many politicians in the US, Senator Charles Schumer in particular, have stressed the need for New York to feature first in the new name. The name has also proved to be a thorny issue in Europe. The Deutsche Börse is expected to own 60% of the new company but some fear that allowing New York to occupy a more prominent position in the name of the exchange would imply control shifting away from Europe. Both exchanges have decided to form a committee comprising marketing and legal experts to devise a name that would appease all parties. A competition has also been announced for employees to suggest names for the new exchange. Some of the names that have been proposed are NYSE-DB, NYSE Deutsche Börse and Global Exchange. DB NYSE, a name which also suggested earlier, is no longer in the running.

Though stock exchanges are a source of national pride, some experts believe that the name of the exchange does not fit into the realm of this major business deal. The two exchanges have much bigger issues to sort out with regards to regulatory clearance and the name of the combined exchange is somewhat trivial in the grand scheme of things. Politicians need to understand that globalization is well integrated into the world of business and squabbling over which name is given more prominence appears to be rather petty. Though New York continues to be a dominant financial center, it is no longer possesses the degree of hegemony in the global financial landscape as it used to. Politicians must thus realize that the name of the new exchange is not going to physically impact New York’s position as a financial center and they should allow the two companies to focus on more pressing matters.

Meanwhile, the deal was also initially met by a joint counterbid from the Nasdaq OMX Group and the InterContinental Exchange (ICE). Nasdaq and ICE offered $11.3 billion for gaining control of NYSE Euronext compared to Deutsche Börse’s offer of $9.53 billion. However, the NYSE board rejected the joint bid from Nasdaq and ICE earlier this weekend and it claimed that the merger between the New York and Frankfurt based exchanges was more in line with its long term goals and was more likely to create value for its investors. The Nasdaq/ICE, which was at a 19% premium to the NYSE-Deutsche Börse deal, can be partially attributed to the well documented rivalry between the Chief Executives of NYSE and Nasdaq. Duncan Niederauer, CEO of NYSE Euronext and Robert Greifeld, CEO of the Nasdaq OMX Group have had a long standing rivalry and the two giant exchanges have been engaged in tough competition over the past few decades. Nasdaq’s concerns regarding the merger between NYSE and Deutsche Börse are well founded as the resultant company would eclipse Nasdaq’s presence and soon put an end to any rivalry that may have existed. Nasdaq’s reaction to NYSE’s rejection of its bid has not yet been recorded but it will be interesting to see if it plans to raise its bid high enough to grab NYSE’s attention.

It still remains to be seen how long it will take NYSE and Deutsche Börse to come up with a new name and if this merger can clear all regulatory hurdles. It also remains to be seen if Nasdaq and ICE will put forward a more attractive bid for the NYSE that will force the NYSE to reconsider its decision. All these uncertainties will ensure that this deal will continue to hog headlines in the times to come.

References:

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http://www.bloomberg.com/news/2011-04-03/nyse-s-niederauer-backs-deutsche-boerse-bid-frankfurter-says.html

http://www.bloomberg.com/news/2011-04-04/nyse-shareholders-anticipate-counter-bid-from-deutsche-boerse.html

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http://online.wsj.com/article/SB10001424052748703362904576219032870914782.html?mod=WSJ_article_related

http://online.wsj.com/article/SB10001424052748703748604576225471841347068.html?KEYWORDS=Nasdaq+ICE+Weigh+a+Price+for+NYSE

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http://www.bloomberg.com/news/2011-04-02/deutsche-boerse-backs-its-nyse-offer-berliner-zeitung-reports.html

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http://blogs.wsj.com/deals/2011/04/10/dealpolitik-nyses-nasdaq-rejection-touches-all-the-legal-bases/

http://online.wsj.com/article/AP0073e40a51b04c36baf9a2e95fe3e2c2.html?KEYWORDS=NYSE

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