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The New York Stock Exchange unveiled an 8 billion euro ($10.2 billion) share and cash bid for Euronext, opening the way to a possible bid battle with Deutsche Boerse just a day before an annual meeting where Euronext shareholders could decide on its future.
The proposed alliance detailed on Monday would create a mammoth transatlantic exchange with a total market capitalisation of listed companies of around $27 trillion, headquartered in New York but preserving the federal model favoured by Euronext.
The NYSE offer values Euronext stock at 8 billion euros in total or 71 euros per share - or 75 euros including ordinary and special dividends totalling 4 euros per share that Euronext already said it would pay to its shareholders.
The NYSE Group Inc said its proposed merger would yield cost and revenue synergies of $375 million, which analysts said was higher than the synergies of around 250 million euros ($318.7 million) seen in a Euronext-Deutsche Boerse tie-up. NYSE is to hold a conference call at 1200 GMT.
Euronext said its board would meet on Monday afternoon to consider the two proposals and other indications of interest.
On Friday, the operator of the Paris, Amsterdam, Brussels and Lisbon bourses, and of London's Euronext.liffe derivatives exchange, had rebuffed a Deutsche Boerse offer as "nothing new."
Euronext shares, which have surged nearly 70 percent since the start of the year, lost an opening gain of 4 percent to be down 3.8 percent at 71.95 euros by 0917 GMT as some analysts questioned the feasibility of the NYSE synergies.
Deutsche Boerse stock dropped over 7 percent to 102.57 euros amid concerns it will fail to pull off a Euronext deal and will be left isolated in the consolidation spree, traders said.
Deutsche Boerse on Monday denied a report in the Financial Times that it was considering a 90-euro-per-share bid for Euronext. "The payment of a premium to the respective enterprise values is not anticipated in the proposed transaction structure," Deutsche Boerse said in a statement, but left it open how much it was willing to offer.
The NYSE's proposal is the latest salvo in a 17-month power struggle for global exchange consolidation, with Euronext talking first to the London Stock Exchange before turning to Deutsche Boerse and later the NYSE as the Nasdaq Stock Market Inc took 25 percent in the LSE. At stake is a need for bourse operators to consolidate to reach economies of scale, boost volumes and reduce trading costs for clients.
Under the terms of NYSE's proposal, each share of NYSE Group will be converted into one common share of the combined company, which will be named NYSE Euronext, NYSE said.
Holders of Euronext ordinary shares will be offered the right to exchange each of their shares for 0.98 shares of NYSE Euronext stock and 21.32 euros ($27.18) in cash.
"It's a good deal for Euronext, it's what they were looking for ... You have the synergies. In effect you have an additional 15 percent upside to the Euronext share price on the close," said analyst Mamoun Tazi at Man Securities, adding he expected Deutsche Boerse to counterbid.
Under the NYSE plan, NYSE Group Chief Executive John Thain would become the new entity's chief executive, with Euronext Chairman Jan-Michiel Hessels becoming its chairman.
Euronext Chief Executive Jean-Francois Theodore would become deputy chief executive officer.
The proposal sought to answer Euronext's demand that trading be separated from clearing and settlement activities, but one observer pointed that the statement did not say which regulator would have authority on the European arm of NYSE Euronext. But another industry observer said one of the aims of the NYSE trying to build a European bridgehead was precisely to get around the tough Sarbanes-Oxley regulation that requires US-traded companies to disclose more about their internal controls, which may deter some companies from listing.
The Paris-based operator and its German rival have been in talks for months, but these discussions have stumbled on crucial issues such as the business model of the merged entity and the location of its headquarters.
On Friday, Deutsche Boerse proposed to set up a joint holding company managed from Frankfurt that would leave cash trading and listing activities in Paris.
French Finance Minister Thierry Breton said he hoped offers for Euronext would still improve, adding it was important for France that there remained a strong share trading activity in Paris and that the French financial regulator would retain its authority on the French market.

Copyright Reuters, 2006

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