Merger partners D.Boerse, NYSE dangle a dividend

FRANKFURT/NEW YORK Tue Jun 7, 2011 2:04pm EDT

Shareholders arrive for the annual shareholders meeting of German Stock Exchange Deutsche Boerse in Frankfurt May 12, 2011. REUTERS/Alex Domanski

Shareholders arrive for the annual shareholders meeting of German Stock Exchange Deutsche Boerse in Frankfurt May 12, 2011.

Credit: Reuters/Alex Domanski

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FRANKFURT/NEW YORK (Reuters) - Deutsche Boerse AG (DB1Gn.DE) and NYSE Euronext NYX.N unveiled a special dividend on Tuesday, flexing their financial muscle a month before shareholders decide whether to approve a merger that would create the world's largest exchange operator.

Shareholders in a combined company are being offered a one-time dividend of 2 euros per share after the deal closes, the companies said in a joint statement. The total payout is about 620 million euros ($910 million).

The dividend, which had been discussed with shareholders in the last few months, was offered despite the fact that rivals Nasdaq OMX Group (NDAQ.O) and IntercontinentalExchange (ICE.N) dropped a competing offer for the New York Stock Exchange parent last month.

Now, the main hurdle for the two exchanges is winning antitrust approval for their $10.2 billion deal in Europe, where the combined company will have a lock on exchange-based derivatives trading.

"I'm not sure whether that dividend was necessary to get the shareholder approval at this stage of the game because you didn't have a competing bid, and I think the risk is more on the competition (antitrust) side," said Chris Allen, exchanges analyst at Evercore Partners.

Deutsche Boerse shareholders have until July 13 to tender their shares in the deal, and shareholders in the Big Board parent are set to vote on July 7.

Deutsche Boerse's shareholders would control 60 percent of the new company. Deutsche Boerse Chief Executive Reto Francioni will assume the role of chairman while Duncan Niederauer, who is head of NYSE Euronext, will become chief executive.

"The ability to provide a special dividend underscores the strength of the combined group," Niederauer said.

Earlier this year Francioni had brushed aside suggestions the company was poised to sweeten its offer.

"We have a signed merger agreement ... which was fully negotiated over a long period of time," Francioni told analysts at the time. "We stand by the terms of the agreement and we are working toward a timely closing."

Yet the $11.3 billion bid from Nasdaq and ICE -- thwarted by the U.S. Justice Department and then withdrawn -- may have influenced the dividend decision. Reuters reported on April 13 that NYSE Euronext and Deutsche Boerse were weighing several options including paying a special dividend, to win shareholder support.

"Both companies have been returning capital to shareholders, and they thought they had a potential to do that given the combination," said Allen. "This is something that has been telegraphed a bit over the last month."

The news came after NYSE Euronext shares were halted, and sparked a brief 1 percent jump. The shares were off 2 cents at $35.48 in afternoon trading. Deutsche Boerse shares closed down 0.6 percent at 53.50 euros.

In a separate move announced on Tuesday, Deutsche Boerse said it had struck a deal with Switzerland's SIX Group to take full control of derivatives arm Eurex, one of the main profit drivers at Deutsche Boerse.

(Reporting by Edward Taylor in Frankfurt and Jonathan Spicer in New York; editing by David Hulmes and Matthew Lewis)

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