Deutsche Börse Proposes to Euronext in Monetary Marriage

Deutsche Börse, which operates the Frankfurt stock market, signaled it was prepared to make important concessions to Euronext to persuade the operator of the Amsterdam, Brussels, Paris and Lisbon exchanges to merge their operations.

Deutsche Börse has long been wooing Euronext. But the latter has so far reacted rather coolly to Frankfurt's overtures, and said Friday there was "nothing new" in the latest German proposals.

Meanwhile, Euronext has embarked on talks with other suitors.

Top among them are the New York Stock Exchange (NYSE), the world's biggest equity market, which is looking hard for a European partner after its rival US market, the tech-oriented Nasdaq, acquired a 25.1 percent stake in the London Stock Exchange.

Börse waits on assembly decision on takeover

A group of influential Euronext shareholders gave interested parties until a general assembly on Tuesday to make a clear offer for the European operator, failing which they would vote for a merger with Deutsche Börse, the Financial Times reported Friday.

It quoted David Slager, a partner in the hedge fund Atticus Capital as saying: "We have given the NYSE or any other exchange a deadline of the annual meeting."

Atticus Capital holds stakes of roughly 6 percent in each of Deutsche Börse, Euronext and the NYSE.

"We have told him [NYSE head John Thain] that we intend to vote on the floor in favor of Deutsche Börse's deal in the absence of any other mutually agreed proposal," Slager added.

Directors of both the NYSE and Deutsche Börse have met with French Finance Minister Thierry Breton regarding their respective talks with Euronext, the finance ministry said Friday. It was the first time that the NYSE was clearly identified as a potential Euronext partner.

Deutsche Börse and Euronext have failed to agree on key issues such as the site of the merged company's headquarters and on the future structure of the group.

German exchange company making concessions

Among the biggest concessions made to Euronext on Friday, Deutsche Börse suggested that a holding company be set up for the new merged company which would be "domiciled" in Amsterdam.

Furthermore, the German company said it was "prepared to contribute its cash equity clearing to ... an independent, privately-run service provider".

While Deutsche Börse has so far refused to abandon its integrated structure, Euronext has repeatedly argued for the clearing activities to be excluded from any merger.

The German company also said the tie-up should be a "merger of partners" rather than a takeover of Euronext by the bigger Deutsche Börse.

"A new parent company, domiciled in the Netherlands, should act as a holding company for both groups. Neither Euronext nor Deutsche Börse shall be the absorbing entity to combine the two groups," the company proposed.

All Börse and Euronext businesses to be consolidated

All of Deutsche Börse and Euronext businesses would be included in the new group, "including Deutsche Börse's post trading activities," the German company said.

"But we are prepared to contribute our cash equity clearing to a truly European cash equity clearing organization operated as an independent, privately-run service provider," it said.

It suggested that cash equity trading and listings activities would be operated out of Paris, while derivatives trading would be operated and located in Frankfurt and in London via Euronext's derivatives unit, LIFFE.

The combined entity would also have a two-tier board structure, with both companies represented equally on the executive board. "Initially, the management board of the combined group shall be led by Euronext chief Jean-Francois Theodore and Deutsche Börse head Reto Francioni becoming co-CEOs," Deutsche Börse said.

Euronext sources unenthusiastic about proposal

In Paris however, Euronext spokeswoman Antoinette Darpy told AFP: "There is absolutely nothing new in these proposals."

Deutsche Börse stressed that a merger would represent a "significant step forward in the integration of European financial markets. It would form the logical partner for other European exchanges and would have the ability to compete on a global scale."

In Milan, the president of the Italian stock market Angelo Tantazzi said Friday that Euronext was the Borsa Italiana's "first choice" for a potential tie-up.

His comments were warmly greeted in Paris, with the Euronext spokeswoman telling AFP: "We are very pleased with the position expressed by Angelo Tantazzi, which reinforces the idea that Euronext's open, federal model allows it to integrate, with full respect for specificities, other European markets."

Investors, meanwhile, appeared to like Deutsche Börse's proposals. In Frankfurt, Deutsche Börse shares closed with a gain of 3.01 percent at 111.10 euros. Euronext shares soared 5.97 percent to 74.60 euros in Paris.