Thain says there is no Langone-Mack group

By Joseph A. Giannone

NEW YORK (Reuters) - New York Stock Exchange Chief Executive John Thain apparently is not too worried about former NYSE director Kenneth Langone's efforts to block the Big Board's proposed combination with Archipelago Holdings.

Two weeks ago Langone said he would organize a competing takeover bid for the NYSE, and made a splash as he recruited John Mack, former head of Credit Suisse First Boston and Morgan Stanley, to round up support from banks and investment firms.

But for more than a week, this group has been quiet as they crunch numbers of a buyout proposal and reach out to investors.

"I don't think there is a Langone-Mack group," Thain said at the Reuters Exchanges Summit in New York on Monday. "And, no, we haven't had conversations about it."

Spokesmen for John Mack and Ken Langone were not immediately available for comment.

Last month, the NYSE announced a combination with Archipelago, the largest U.S. electronic stock and options market. The deal will transform the exchange into a publicly traded, for-profit company and accelerates its effort to develop electronic trading.

But multiple advisory and shareholder roles played by Thain's former employer, Goldman Sachs Group Inc., helped Langone to rally investors. The way the deal was brokered, without an auction, prompted questions whether the NYSE was getting the highest price possible.

NYSE members will own 70 percent of the combined company, NYSE Group Inc. Once seats are swapped for new equity, those shares cannot be sold for three years under lock-up provisions.

The Langone-Mack group argues NYSE seats are worth more than the implied $2.5 million under the Archipelago deal. At the end of April, the group enlisted the support of Dan Tully, former CEO of Merrill Lynch, and hired veteran mergers advisor Dick Barrett.

On April 26, Mack said he had spoken with Thain and said the NYSE leader promised to provide more information on the Archipelago deal. The group initially attracted interest from some of the largest U.S. private equity firms and hedge funds, but since the last week of April the group has been quiet.

Thain, speaking at Reuters' New York offices, argued investors already have demonstrated their support for the deal by bidding up the shares of both parties.

"The fact that (NYSE) seats went up 50 percent, as well as Archipelago's stock price went up 100 percent, is valuing the deal. Those two things tell you the implied value of the deal," Thain said. "If seats hadn't gone up 50 percent, that would be a worry. So, this actually is exactly what you want to have happen with a transaction like this, where both sides win."

So far market demand for seats has backed up Thain's viewpoint. On April 25, a seat sold for $2.4 million, up $600,000 from the previous week and more than double a January sale below $1 million. Another membership sold for $2.4 million last Friday.

Analysts and investors had observed that continued increases in seat prices could put pressure on Thain and the NYSE to seek more favorable terms. The record price for a membership was $2.7 million near the peak of the bull market in 1999.

Shares of Archipelago were trading at $32.50 on Monday, up from $18 before the deal was announced on April 20.

(News from the Reuters Exchanges and Trading Summit will be delivered throughout the day Monday and Tuesday to Reuters terminals and to the Reuters.com Web site, reuters.com)