May 24, 2006
Euronext Turns Down Offer From German Exchange
By JAMES KANTER
International Herald Tribune
PARIS, May 23 — Euronext shareholders Tuesday rejected a proposal to merge with a rival bourse in Germany, keeping the exchange in play in hopes of a bidding war that could reshape the business of trading in Europe and the United States.
Euronext's chief executive, Jean-François Théodore, who favors a proposed tie-up with the NYSE Group, the owner of the New York Stock Exchange, insisted that the German exchange was not out of the picture — a strategy possibly aimed at spurring the American group to raise its bid and counter claims that it was seeking a foothold in Europe at a discount.
Speaking at Euronext's annual meeting in Amsterdam, Mr. Théodore played down the significance of the vote on the offer from Deutsche Börse, describing it as a way of safeguarding shareholders' "freedom of choice." But he also made clear that he disliked the prospect of Euronext's headquarters moving to Frankfurt from Paris, and he highlighted the lesser antitrust concerns and greater cost savings that he said would result from a tie-up with the Americans.
"N.Y.S.E. and Euronext is the most attractive combination," he said, promising to call another shareholder meeting to vote on a transaction "as soon as practicable."
For some shareholders, the meeting turned into an opportunity to press the Euronext management to hold out for improved offers, possibly even beyond Germany and New York.
Jan-Michiel Hessels, the chairman of Euronext's supervisory board who would be the chairman of a combined New York Exchange and Euronext, conceded that "the possibility of a knockout bid is one of the scenarios that we are thinking of."
Euronext, which runs the Paris, Brussels, Amsterdam and Lisbon exchanges, is the latest focus of consolidation after the Nasdaq — a rival of the NYSE Group — acquired 25 percent of the London Stock Exchange.
On Monday, the NYSE Group made an offer that Euronext executives said was 73 to 74 euros a share, or as much as 8.3 billion euros ($10.2 billion).
On Tuesday, Deutsche Börse put numbers behind its bid, which was made Friday. Deutsche Börse would pay 76.60 euros a share, or about 8.6 billion euros, according to reports.
Serge Harry, the chief financial officer of Euronext, called the numbers "misleading" because they were based on Monday's closing prices — which are probably higher than the three-month average on which the German offer is actually based.
Using prices from the most recent three-month period, Euronext officers said that the true value of the Deutsche Börse bid was closer to 70.45 euros a share — lower than the American offer.
A Deutsche Börse spokesman, Walter Allwicher, said that the three-month average would be dated from the moment when both sides agree.
In resisting the German offer, Mr. Théodore must tread a fine line because the two exchanges have some big shareholders in common, including the Children's Investment Fund, which owns 10 percent of Euronext and favors a merger with Deutsche Börse. The fund reiterated that position on Tuesday.
Stock in the NYSE Group is currently highly valued relative to its earnings, making its shares a particularly valuable currency in any bidding war.
But the German exchange might have an advantage in its ability to raise enough additional cash to convince Euronext shareholders that an all-European deal is the better move.
The German exchange "could offer more cash without harming itself, especially since it has no debt right now," said Robert Mazzuoli, an analyst with Landesbank Rheinland-Pfalz.
Raising its bid might be the best way for Deutsche Börse to avoid standing on the sidelines during rapid global consolidation.
"It makes no sense to overpay for a company like Euronext, but without this merger the vision for Deutsche Börse's future is gone," said Ulrich Hocker, president of DSW, the German association of small shareholders.
In coming weeks, Mr. Théodore may succeed in bulking up Euronext by striking a deal to buy the Milan-based exchange, Borsa Italiana. He told shareholders Tuesday that he hoped to have a preliminary agreement with Borsa Italiana by the end of June.
Deutsche Börse has continued efforts to make its overture more palatable, offering the chief executive's slot to Mr. Théodore until 2008.
Euronext, however, is unlikely to favor even that arrangement, which would still probably put the majority of executives in Frankfurt.
Deutsche Börse said Tuesday that it would sound out its own shareholders about additional moves at its annual meeting Wednesday in Frankfurt, and it stressed its continuing interest in a deal.
"We continue to believe in the strong substance and value, as well as the earnings accretion of a combination of Deutsche Börse and Euronext to both shareholder groups under our proposal," the Deutsche Börse chief executive, Reto Francioni, said in a statement.
Carter Dougherty contributed reporting from Frankfurt for this articleand Heather Timmons from London.
May 24, 2006
Deutsche Boerse Offers a Concession
By THE ASSOCIATED PRESS
Filed at 9:17 a.m. ET
FRANKFURT, Germany (AP) -- Germany's Deutsche Boerse AG offered a concession in its battle with the New York Stock Exchange to take over European stock-market operator Euronext, saying Wednesday that Euronext CEO Jean-Francois Theodore initially could become sole boss of the combined company.
Deutsche Boerse had previously proposed that Theodore initially would share the top job with its own Chief Executive Reto Francioni, who would then take over as sole leader.
''I would like to confirm ... that in our last letter a few days ago, in consultation with Dr. Reto Francioni, I suggested that Jean-Francois Theodore, under certain criteria, could become sole CEO up until the AGM (annual general meeting) of 2008,'' Kurt Viermetz, Deutsche Boerse's supervisory board chairman, told shareholders at the company's annual general meeting.
Euronext, which runs the Paris, Brussels, Amsterdam and Lisbon exchanges, is at the center of the current round of stock market consolidation after the Nasdaq Stock Market Inc. acquired 25 percent of the London Stock Exchange PLC. It has said it currently favors the offer from the New York Stock Exchange.
The NYSE's cash-and-stock offer was worth around 7.6 billion euros ($10 billion) at closing prices Tuesday. Analysts have estimated Deutsche Boerse's bid to be worth around 8.6 billion euros ($11 billion).
But the NYSE bid contains more cash than the Deutsche Boerse deal, and the Deutsche Boerse proposal requires the combined company to carry more debt. Both bidders have touted the strategic benefits and cost savings of their plans.
Viermetz cited managers' ''fundamental belief that a combination between Euronext and Deutsche Boerse would be the best and potentially the last opportunity to create a European powerhouse,'' ensuring long-term competitiveness with leading American and Asian operators.
Francioni said Deutsche Boerse wants to take ''a proactive lead'' in industry consolidation.
He noted that neither Euronext managers' stated preference for NYSE nor its shareholders' refusal to commit in principle to a merger with Deutsche Boerse were binding decisions.
''We will therefore carefully analyze the situation,'' he said, without offering further details.
Francioni argued that ''we have done our best to persuade the Euronext management of the potential for the combination and of the quality of our proposal.'' He said the proposal was a ''fair balance'' and would create value for shareholders.
He stressed heavily his company's pledge of a ''merger of partners'' -- a contrast with NYSE's bid, which is structured as a takeover.
''The reproach leveled time and again against us -- that we would impose our business model on others -- will not get any more accurate by repeating it,'' Francioni said.
Viermetz said Deutsche Boerse appears to face a bidding battle in which ''level-headedness is now called for to protect European interests.''
If Deutsche Boerse does not win Euronext, its ''growth strategy would be continued in all segments, products and regions of the globalized market,'' he added.
''We are firmly convinced to be able to cooperate, find partners in these markets and to be able to identify acquisitions that will benefit our shareholders and our clients.''
One shareholder representative called on Francioni to outline alternatives to Euronext.
Klaus Nieding, of Germany's DSW shareholders' rights group, urged him to say how he intends to prevent Deutsche Boerse being sidelined if both the LSE and Euronext go to U.S. rivals.
Markus Kienle, representing another investor group, SdK, voiced fears that Deutsche Boerse could itself become a takeover candidate if it fails to secure a merger.
Deutsche Boerse shares fell nearly 2.7 percent to 100.04 euros ($128.59) on the Frankfurt exchange in an overall lower market. Euronext shares dropped 3.1 percent to 67.80 euros ($87.15).
