By Max Clarke

Deutsche Boerse AG and NYSE Euronext (XETRA:DB1 and NYSE:NYX respectively) today announced that they have entered into a business combination agreement following approval from both companies’ Boards.

Under the agreement, the companies will combine to create the world’s premier global exchange group, creating the world leader in derivatives trading and risk management, and the largest, most well known venue for capital raising and equities trading. The combined group will offer clients global scale, product innovation, operational and capital efficiencies, and an enhanced range of technology and market information solutions.

The transaction will strengthen Frankfurt and New York as key financial centers, while benefiting Paris and London as well as Luxembourg. Each of the group’s national exchanges, including those in Amsterdam, Brussels, and Lisbon, will keep its name in its local market and all exchanges will continue to operate under local regulatory frameworks and supervision. The combined group will work closely with regulators in all markets to facilitate transparency and standardization of capital markets globally.

The combined group will have 2010 combined net revenues 4.1 billion Euros (US$ 5.4 billion), and 2010 Earnings before interest, tax, depreciation, and amortisation (EBITDA) of 2.1 billion Euros (US$ 2.7 billion); thus becoming the world’s largest exchange group by revenues and EBITDA. Based on 2010 net revenues, the combined group will earn approximately 37% of total revenues in derivatives trading & clearing, 29% in cash listings, trading & clearing, 20% in settlement & custody, and 14% in market data, index & technology services.

Reto Francioni, Chief Executive Officer of Deutsche Boerse, said:

“This combination will create significant value for all stakeholders. This transaction brings together two of the most respected and successful exchange operators in the world to lead the way in global capital markets and set the standard for growth, quality and market reach. The combination makes sense for all of our constituencies. Shareholders of both companies will benefit from unique growth opportunities and synergies. Clients will have unparalleled access to markets, products, information, world-class technology, clearing services and settlement — globally and around the clock. From a regulatory perspective, we are committed to remaining the world’s most transparent and best regulated platform.”

He added: “This combination positions the group for a unique growth opportunity as clients seek more transparency, greater confidence in pricing and premier quality execution. In addition, we expect that the combined group will be a highly attractive partner for capital markets in Asia-Pacific and other parts of the world.”

Duncan Niederauer, Chief Executive Officer of NYSE Euronext, said:

“Reto and I are committed to bringing together the best of both organizations to create the premier global exchange group and a leader in the rapidly evolving global financial arena. This transaction is a catalyst for the development of a global capital markets community, delivering the best, most transparent, and innovative services for clients and issuers, wherever they are. Our respective shareholders will also benefit from a significantly enhanced growth profile, the opportunity to achieve substantial cost synergies, unparalleled cash flow generation, and very strong credit metrics.”

"The increasing globalization and interconnectedness of capital markets, and the rapidly growing presence of alternative trading venues that operate with less transparency and far fewer regulatory requirements, will position the new company as a true global player well placed to drive the long-term strength and competitiveness of transparent and regulated markets.”

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