London: Deutsche Boerse moved into pole position to win NYSE Euronext after Nasdaq and ICE withdrew their bid for the rival exchange on Monday.
Nasdaq and its co-bidder ICE ditched their $11 billion offer for NYSE Euronext citing antitrust concerns, highlighting the fragility of dealmaking in the closely regulated exchanges industry as pressure to consolidate mounts.
Nationalistic issues are also in play. On Sunday a group of Canadian banks and pension funds announced their intention to derail another major deal in the sector, launching a rival offer to the London Stock Exchange’s bid for TMX Group.
Deutsche Boerse shares rose 5% as traders cheered its better growth prospects. Shares in LSE gained 7%, with markets factoring in a higher chance the British stock exchange could now seek solace in the arms of Nasdaq.
“The fact that Nasdaq and ICE are withdrawing their offer for NYSE is no surprise -- it became clear already that the offer wouldn’t be successful. It’s good news for Deutsche Boerse,” said Konrad Becker at Merck Finck.
Nasdaq and ICE first announced their intention to buy the New York Stock Exchange’s parent on 1 April, seeking to thwart NYSE Euronext’s proposed friendly merger.
They said on Monday it had become clear they would not win regulatory approval -- the deal would have given Nasdaq and NYSE a virtual stranglehold on US listings.
If successful, Deutsche Boerse’s deal with NYSE Euronext will see the German operator emerge as a global powerhouse and force rivals to scale up in order to stay in competition.
“LSE will look towards Nasdaq if it does not get a deal with TMX. Nasdaq does not bring derivatives, but it is a more attractive option (for LSE) than ICE,” a banker familiar with the exchanges industry said.
Nasdaq tried to buy the LSE twice during a previous wave of dealmaking a few years ago, but was thwarted on both occasions by shareholders. Previous approaches to the LSE by Deutsche Boerse, NYSE and Macquarie also failed.
Nasdaq and ICE’s withdrawal comes a day after the Maple Group -- a name that invokes Canada’s most patriotic symbol -- launched a $3.7 billion offer for TMX Group, in a bid that is some 20% higher than the LSE’s.
It would be a severe blow for the LSE’s response to global exchange consolidation if the counter-offer succeeded, Oriel Securities said in a research note, and would harm chief executive Xavier Rolet’s reputation.
But the LSE has little room to fend off the rival bid, as any improved offer would undermine the claim that the LSE and TMX are equal merger partners, something Rolet has stressed to soothe nationalist nerves in Canada.
The British exchange will probably hammer home the message that its combination makes sense because both bourses need scale, something a tie-up with the Canadian banks wouldn’t achieve, bankers said.
That is particularly the case now that a super-exchange looks set to be created around NYSE Euronext.
The LSE could also be helped by competition issues regarding the Canadian counter-bid. There are questions over whether TMX can come under the control of a group made up of some of its main customers, bankers also said.
Maple includes four of Canada’s largest banks -- Toronto Dominion Bank, National Bank of Canada, Canadian Imperial Bank of Commerce and Bank of Nova Scotia -- which are also significant customers of TMX.
The LSE and TMX proposal was announced 9 February, only to be followed hours later by news of Deutsche Boerse’s planned $10.2 billion deal with NYSE Euronext.