Deutsche Börse in new move on Euronext (FT)

Deutsche Börse on Monday launched a fresh effort to woo Euronext away from a deal with the NYSE Group, making key concessions on operations that would give its Paris-based rival more power than the Germans had been prepared to concede.

The move involves no additional cash and was not presented to the Euronext board. John Thain, NYSE Group chief executive, dismissed the move, saying: “Based upon what I have seen so far, I don’t see any reason to change any element of our transaction.”

He also hinted that if Deutsche Börse improved the financial terms of its bid, the NYSE had more flexibility to respond, saying: “The NYSE has no debt and $650m in cash.”

Deutsche Börse’s concessions followed weeks of meetings with shareholders, bankers and politicians in Europe, and are aimed at persuading Euronext that its bid would not dismantle the organisation. On Monday, Kurt Viermetz, Deutsche Börse chairman, said it could raise the bid as a “final option”.

The move comes amid growing scepticism about the US tie-up among the French political establishment and is aimed more at public opinion than at winning over the Euronext board.

Advisers to both Euronext and Deutsche Börse privately agree that Euronext’s objections to a merger hinged on Deutsche Börse’s insistence on dismantling much of the organisation, and on controlling the new company.

The latest offer includes three significant concessions, one of which is integration of Deutsche Börse’s information technology business into Euronext’s.

Deutsche Börse also agreed that after a merger only German equities would be cleared through its Eurex subsidiary, leaving current Euronext clearing services in the hands of its LCH.Clearnet platform.

Thirdly, Deutsche Börse tried to address fears that the merger would get bogged down in scrutiny from European Union competition authorities by seeking advance clearance of the deal.
Euronext declined to comment last night but its advisers did not dismiss the approach out of hand. Under its agreement with the NYSE, Euronext may not solicit new offers, but an adviser said its board would be obliged to look at any better offer.

Rich Repetto, exchanges analyst at Sandler O’Neill, said the changes were “only a token of improvement” and that Deutsche Börse must improve the financial terms of its proposal “to be taken seriously”.

Others suggested the deal could hinge on NYSE’s share price, which has rebounded 10 per cent since last week but remains 9 per cent below its level when it announced the Euronext bid. This affects the mathematics of the deal. Deutsche Borse said that at the close on Friday, its bid was worth €65.98 per Euronext share, against €65.67 for the NYSE’s bid.

Additional reporting by Anuj Gangahar in New York

Copyright The Financial Times Limited 2006