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NEW YORK Nasdaq OMX Group Inc and Intercontinental Exchange Inc put pressure on NYSE Euronext on Tuesday to start talks by promising to pay a $350 million fee if regulators blocked their takeover attempt.
Nasdaq and ICE also said they secured committed financing from banks to back their $11.1 billion bid for NYSE and expected U.S. antitrust regulators to start a review of their bid soon. A merged Nasdaq and NYSE would have a virtual stranglehold on U.S. stock listings.
The announcement was designed to address two key concerns raised by NYSE's board: antitrust risk and strategic fit. NYSE had earlier rejected Nasdaq and ICE's initial bid in favor of a $9.8 billion deal with Germany's Deutsche Boerse AG.
Nasdaq and ICE also said they would give money to NYSE to pay a 250 million euro ($357.5 million) breakup fee the Big Board parent will have to give to Deutsche Boerse if it walks away from their existing deal.
Nasdaq and ICE will split the break-up fees equally, a source familiar with the situation said.
NYSE said it will review the revised bid submitted by Nasdaq and ICE. But the $350 million reverse breakup fee offered by Nasdaq and ICE falls far short of the $1 billion or more that sources have said NYSE would likely want.
"I don't know that it moves the needle," said Patrick O'Shaughnessy, an equity research analyst with Raymond James. "The only real change to deal terms is the breakup fee and I am not sure that it is large enough to sway the NYSE board."
ICE CEO Jeffrey Sprecher and Nasdaq chief Bob Greifeld said they expected the NYSE board to start conversations with them and pointed out Deutsche Boerse had not offered NYSE any fee if the German exchange failed to get regulatory clearances.
"They could be displeased with our reverse breakup fee, but the important point is that in their existing deal with Deutsche Boerse, there is no breakup fee," Greifeld said.
Both takeover offers face tough regulatory reviews on both sides of the Atlantic, complicating things for investors betting on which bid -- if any -- will prevail.
The NYSE's shares were up 1 percent at $38.70, nearly 3 percent higher than the current value of the Deutsche Boerse offer, but 9 percent below the $42.52 per share offer price in the Nasdaq-ICE bid, indicating investors expect more wrangling.
The Nasdaq-ICE bid is currently about 13 percent higher than the competing deal.
"It's a question of, what do the shareholders want? It's not whether NYSE management likes it or not," Greifeld said.
Nasdaq and ICE said they have lined up financing commitments of $3.8 billion and planned to buy $66 million worth of NYSE Euronext voting shares. That would represent 0.7 percent of the company's market value based on Monday's closing stock price of $38.32.
The share purchase would satisfy one of the requirements Nasdaq and ICE would need to meet under U.S. antitrust laws to make a pre-merger notification, according to Richard Repetto, an analyst at Sandler O'Neill Partners.
Nasdaq has received financing from banks, including Bank of America Corp, Nordea Bank AB, Skandinaviska Enskilda Banken AB and UBS AG. ICE is getting financing from a syndicate, including Wells Fargo & Co and Bank of America.
The two have one-year committed financing, the source said.
Nasdaq and ICE said they have begun talking with the U.S. Department of Justice's antitrust division about their bid.
Greifeld said they were giving the department "a tremendous amount of data" and had been meeting with them.
"So it is our hope that after six or seven weeks in the process that we will start getting some feedback from them," Greifeld said. "But making clear, it is up to them to decide how and when they are going to give us feedback. We don't control that timing."
Executives at all four exchanges have also taken their respective cases to NYSE shareholders.
Sprecher and Greifeld said in a letter to NYSE Euronext Chairman Jan-Michiel Hessels that early talks with NYSE shareholders have made them confident their bid was superior.
"Based on our own conversations with your stockholders, we sense that they want the Board to engage with us to determine if, in fact, our proposal is better for NYSE Euronext," they wrote in a letter dated April 19.
Deutsche Boerse said it remained committed to its agreement with NYSE, and was moving ahead with integration planning.
Nasdaq closed down 0.6 percent at $27.40 and ICE edged down 0.4 percent to $119.33 on Tuesday.
(Reporting by Phil Wahba, additional reporting by Nadia Damouni; editing by Dave Zimmerman, Derek Caney and Matthew Lewis, Gary Hill and Andre Grenon)