- Patrick Young
Summary
The worst kept secret in exchange mergers, a NASDAQ ICE bid for NYSE Euronext has finally been announced on April Fool’s Day. This may be an unfortunate choice of date for a deal without many clear merits.
Analysis
That the NYSE Euronext deal has been launched on April Fool’s Day may yet make an amusing footnote in exchange history. While the current proposal from Deutsche Boerse has a credible business case behind it, the rationale for this bid is, at best, somewhat contradictory.
If it succeeds, InterContinental Exchange will garner the most significant assets: the LIFFE futures exchange and related derivatives business units. This is a fabulous franchise which would elevate ICE to the top rank of exchanges.
NASDAQ, on the other hand, seems content to plough the increasingly challenging furrow of bulking up its equities trading platforms, in particular in the ultra-competitive USA. It will gain an extra brand name in NYSE but it already has the NASDAQ name so the replication is hardly likely to benefit the bottom line.
For ICE this deal is a win win. At worst, they force Deutsche Boerse (DBAG) to pay more for NYSE – a disruptive tactic they have used before (to make CME pay more for CBOT for instance).
For NASDAQ it is really difficult to see any benefit whatsoever accruing from this deal which will merely make NASDAQ a larger dinosaur than it was already in danger of becoming.
For NYSE shareholders at least there is a prospect of a higher valuation on their shares.
Nevertheless, overall this appears to be a deeply flawed deal from the NASDAQ standpoint, based on a reactionary understanding of the exchange industry.
ICE shareholders will like it, presuming they think the bid can prevail and deliver the finest assets to Jeff Sprecher’s shrewd offices. NASDAQ shareholders ought to be concerned at the vision of management if they truly believe this is a deal that will help their future prospects.
As I have frequently remarked before “this is a derivatives world.” NASDAQ seem to be turning their back on the future with a somewhat ill-conceived, if not downright myopic, vision of the future of markets.
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