NYSE shareholders back D.Boerse deal

NEW YORK/CHICAGO Thu Jul 7, 2011 1:25pm EDT

1 of 4. A U.S. flag flies outside an entrance to the New York Stock Exchange July 7, 2011.

Credit: Reuters/Brendan McDermid

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NEW YORK/CHICAGO (Reuters) - NYSE Euronext NYX.N shareholders approved a $9.6 billion takeover of the American exchange operator by Germany's Deutsche Boerse AG (DB1Gn.DE) on Thursday, moving the focus across the Atlantic where the deal faces its toughest battles.

The deal now needs approval from 75 percent of Deutsche Boerse shareholders by Wednesday, and then must survive a thorny European Commission antitrust review that is likely to run through the rest of the year.

NYSE Chief Executive Duncan Niederauer said the German vote had a high hurdle to clear but so far the tendering process was a little ahead of what he had expected it to be.

About 25 percent of shareholders are common to the two companies, and those investors had not yet tendered their shares, he said.

"I have not met a single Deutsche Boerse shareholder who is not supportive of the transaction," Niederauer said at the shareholder meeting in New York.

About 96 percent of NYSE shareholders who voted backed the deal, representing some 65.6 percent of all shares outstanding, preliminary results showed. The final vote results are expected on Friday.

The exchanges have promoted the deal as a merger of equals -- in part because it allows Niederauer to run the combined entity. The larger Frankfurt-based bourse, however, will control 10 of 17 board positions, while its shareholders will own roughly 60 percent of a yet-to-be-named Netherlands-based holding company.

While Deutsche Boerse's management was quick to welcome the outcome of the vote in New York, labor representatives remained steadfastly opposed and recommended that shareholders reject the deal on the grounds that it "penalized" the German company.

The deal amounted to a "reverse takeover," where the interests of Deutsche Boerse shareholders were not given sufficient consideration, Deutsche Boerse's works council said.

The tie-up between NYSE and the German exchange was announced in February amid a flurry of cross-border deal attempts by exchanges eager to cut costs and diversify in the face of fast-eroding market shares in their traditional stock-trading businesses.

The London Stock Exchange Group Plc (LSE.L) and Canada's TMX Group Inc (X.TO) headed into negotiations, as did the Singapore Exchange Ltd (SGXL.SI) and Australia's ASX Ltd (ASX.AX). One by one, however, those and other deals collapsed, shattered by political and nationalistic resistance.

NYSE Euronext itself was the target of an unsolicited counter-bid in April from archrival Nasdaq OMX Group Inc (NDAQ.O) and its commodities partner, IntercontinentalExchange Inc (ICE.N), in April. The pursuers retreated in May after being rejected by the U.S. Department of Justice over antitrust concerns.

Competitive concerns may take center stage in Europe in coming months.

EU antitrust regulators are likely to complete the first stage of their review by the end of July or early August, Niederauer said. He said he expects to learn the focus of any regulator concerns near the end of that process, which will be followed by a second review.

But he suggested regulators will likely not require any major divestitures before approving the deal, noting that any such conditions would be "unprecedented."

Niederauer said he still expects the deal to close by the end of the year, likely in December.

A NYSE-Deutsche Boerse combination would produce a behemoth that offers trades in virtually every U.S. and European asset class, with annual trading volume exceeding $20 trillion.

It also explains why European antitrust regulators are expected to take a close look at the near lock the company would have on exchange-traded derivatives -- and possibly demand some divestitures or other concessions.

The deal also needs approval from the U.S. Justice Department and national regulators in Europe, but those reviews are seen as less of a threat.

There have been few public critics of the deal in the United States, despite the NYSE's symbolism as a bastion of American capitalism. The exchange was founded in 1792 when share trading began under a buttonwood tree on a block now designated as Wall Street.

To woo votes, Niederauer and his Deutsche Boerse counterpart, Reto Francioni, have been telling shareholders they expect to achieve cost savings from the combination of at least 500 million euros ($715 million), ramped up from an initial projection of 300 million euros ($429 million). They also have promised a special dividend of 2 euros per share ($2.86 per share) after the deal closes.

Under the terms of the deal, Francioni would be chairman of the combined entity.

NYSE shares were up 2.8 percent to $35.33 after the vote results were announced. Deutsche Boerse shares rose 2.5 percent to 54.56 euros.

(Additional reporting by Jonathan Spicer)

(Editing by Jed Horowitz, Andre Grenon, Dave Zimmerman)

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