Euronext announced on Sunday that it would reject the unsolicited bid by rival Nasdaq OMX Group and deal partner IntercontinentalExchange, primarily over antitrust concerns.  The board and management outlined a litany of concerns about the Nasdaq proposal, calling it “highly conditional” and arguing that it poses “unacceptable” risk to shareholders.

“Their loosely worded proposal didn’t address the rather obvious execution risks."  -- CEO Duncan Niederauer.    

    Negatives and Concerns with Nasdaq/ICI Bid.   First, the Nasdaq bid might not survive review by antitrust regulators.  With the bid's proposed cost savings of $740 million within the first 3 years - largely borne by job cuts and the elimination of duplicate back-end systems - influential lawmakers, like NY's Senator Chuck Schumer, are likely to raise objections.  Then there's significant concern over the amount of debt that Nasdaq would have to borrow to finance its offer.  Both Standard & Poor’s and Moody’s have indicated that they may downgrade Nasdaq’s credit rating if it proceeds with the bid.

Nasdaq and ICE also would plan on splitting up NYSE Euronext - with Nasdaq getting the NYSE and equity options exchanges, while ICE would get futures and deriviates markets.

    Flip Side - The Deutsche Boerse Bid.   NYSE Euronext highlighted the benefits of the company’s agreement to merge with Deutsche Börse, which would create a trans-Atlantic powerhouse in stock, options and derivatives trading.  The exchange itself has sought to build itself up over the years.  Its merger in 2006 with Euronext - which operates in several cities including Paris, Amsterdam and Brussels - significantly added to its offerings in the highly profitable derivatives trading business. 

“We’ve had a long-term strategy that we’ve been following for several years.  To break up the company and sell it off in pieces is entirely inconsistent with that strategy.”  -- Duncan Niederauer.

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        Nasdaq, ICE Not Walking Away from NYSE Bid.   Nasdaq OMX Group and IntercontinentalExchange said they are not going to walk away from their bid for NYSE Euronext. Instead, they continue to work behind the scenes to rally support for their bid from NYSE shareholders, asking them to press the NYSE board to talk to the 2 exchanges about the offer.  In particular, Nasdaq and ICE are trying to influence an annual meeting on April 28 in which NYSE shareholders are set to vote on their directors.

Some institutional NYSE shareholders reportedly have told Nasdaq and ICE that their offer has a lot of merit, and that they would like to see NYSE Euronext engage in more conversation. 

For his part, NYSE Euronext CEO Duncan Niederauer said on Sunday that he had not talked to his counterparts at Nasdaq and ICE since they first informed him of their offer on April 1.  He called the bid hollow and undefined.

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        Deutsche Borse Won't Raise its NYSE Offer.   Top managers at the German exchange operator reportedly have no plans to sweeten their offer for NYSE Euronext.  First, they're convinced that the rival bid has little chance of success.  Second, they dispute estimates that the Nasdaq/ICE offer is worth 20% more than a its own bid.  takeover by Deutsche Börse.

The Nasdaq/ICE estimates reportedly fail to take into account other costs, like the $355 million breakup fee that NYSE would owe to Deutsche Börse if it accepted another offer.  NYSE and Deutsche Börse have a binding contract, while the Nasdaq offer is what Mr. Niederauer on Sunday called a “loosely worded proposal.”

Moreover, they said, there's a big risk that a tie-up with Nasdaq might never come to pass because of regulatory hurdles.  For example, a combined Nasdaq and NYSE would have a practical monopoly on new listings, raising antitrust concerns.   Furthermore, the head start means that the 2 companies have already dealt with difficult questions like who will run the combined company - Reto Francioni, CEO of Deutsche Börse, would be chairman;  Duncan Niederauer, Chairman of NYSE Euronext, would be CEO.

However, the they have not agreed on a name for the new entity - although they said that, in any case, they'll preserve the NYSE Euronext and Deutsche Börse brand names.

[NYTimes, Reuters, Dealbook, 4/11/11]