Dec. 20 marked the end of a more than 200-year-old era, when Atlanta-based Intercontinental Exchange, Inc. (NYSE: ICE) announced it would purchase the New York Stock Exchange for $8.2 billion. Although 12-year-old startup ICE stated little would change for the iconic Big Board based in Manhattan’s financial district—provided regulators approve the deal—the move is still significant, marking the end of more than two centuries of independence for the trading floor in Manhattan’s financial district.
ICE plans to have headquarters in Atlanta as well as New York, and NYSE CEO Duncan Niederauer will serve as president of the combined company and CEO of the NYSE Group. Four members of the NYSE board will also be added to the ICE board, expanding its membership to 15.
“We believe the combined company will be better positioned to compete and serve customers across a broad range of asset classes by uniting our global brands, expertise and infrastructure,” said IntercontinentalExchange Chairman and CEO Jeffrey Sprecher, who will continue his position with the company. “With a track record of growth and returns, clearing and M&A integration, we are well positioned to transform our combined companies into a premier global exchange operator that remains a leader in market evolution.”
Although the deal has already been approved by the boards of both companies, it must also be sanctioned by regulators and shareholders of each company. Therefore, the merger is not expected to close until the second half of 2013. Last year, ICE and Nasdaq OMX Group Inc. attempted to buy NYSE Euronext for $11 million, but the bid failed. Analysts speculate the ICE purchase of the NYSE is less likely to raise anti-trust concerns than the previous bid by both ICE and Nasdaq. Under the previous proposal, Nasdaq would have taken control of both stock exchanges.
In the new deal, NYSE Euronext Inc. (NYSE: NYX) shareholders can choose between $33.12 per share in cash—a 27-percent premium over the Dec. 19 stock closing price—.2581 ICE shares, or a combination of $11.27 cash and .1703 shares. ICE will fund the cash portion of the acquisition with both cash and existing debt. Its board believes, however, that the NYSE acquisition will not only help it cut costs but also increase its earnings by more than 15 percent within one year of the deals’ closing.
“The Board of NYSE Euronext carefully considered a range of strategic alternatives and concluded that ICE is the ideal partner for NYSE Euronext in an evolving market landscape,” said Jan-Michiel Hessels, chairman of NYSE Euronext.
NYSE Euronext shares were up more than 33 percent at $31.99 in midday trading, while ICE stock remained steady $127.49.
