NASDAQ’s Bittersweet Deal: What Will Happen Next?

IntercontinentalExchange (ICE) and NASDAQ OMX today unveiled their plan for presenting a ‘superior proposal’ to the NYSE Euronext board.

Translation: the two companies are not giving up in their joint bid.

NASDAQ and ICE have strengthened their initial proposal by addressing perceived regulatory risks that may arise from the transaction, gaining commitments on financing and including a breakup fee.

Despite the financial and antitrust regulation risks that loom over the proposed acquisition, NASDAQ says that it has now received ‘fully committed’ financing of $3.8 billion for the proposed $11.18 billion acquisition of NYSE Euronext from a group of leading institutions, such as Bank of America (BofA), Nordea Bank AB, Skandinaviska Enskilda Banken AB, and UBS Investment Bank.  ICE has signed and received financing from banks such as Wells Fargo and BofA.

The balance of the financing, according to NASDAQ, would come from cash it has on hand and ‘a prudent use of leverage.’

The bid, which now includes a $350 million reverse break-up fee, results in an NYSE Euronext valuation of $42.67 per share as of April 18, 2011 – 21 per cent ($2 bn) above the $35.29 offered by Deutsche Börse. 

The NYSE confirmed that it has received the proposed merger agreement and its board of directors will begin reviewing the proposal in ‘due course,’ making sure that it is ‘consistent with its fiduciary duties and its obligations under its previously announced business combination agreement with Deutsche,’ the NYSE says.    

On April 11, the NYSE  board of directors unanimously voted to reject a takeover offer from NASDAQ and ICE.

As Corporate Secretary previously reported, John Coffee, a corporate governance expert and a professor at Columbia Law School, explained, ‘Deutsche Börse doesn’t really compete with the NYSE but NASDAQ does, tooth and nail. Therefore, the NYSE board could justifiably determine that the NASDAQ offer – although financially superior – is not a superior proposal because of the regulatory problems.’

Now, Jeffrey Sprecher, chairman and chief executive officer of ICE, says, ‘Based on the feedback we have had from NYSE Euronext stockholders, we are more confident than ever that the proposed NASDAQ OMX/ICE transaction is better for them, the markets and the exchange’s customers. We trust that the NYSE Euronext board will seek to enhance the value to its stockholders by meeting with us to evaluate our superior proposal.’

NASDAQ says that the necessary actions to start the antitrust review process have been implemented and the process itself is expected to begin soon.