ICE to Buy NYSE for $8.2 Billion, Ending Era of Independence

NYSE New York Stock Exchange
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The Intercontinental Exchange announced on Thursday plans to buy the NYSE Euronext in a transaction valued at approximately $8.2 billion, bringing to an end the Big Board's storied era of more than two centuries as an independent institution.

The ICE said it intends to offer $33.12 per share, representing a premium of about 37 percent over NYSE Euronext's Wednesday closing price. CNBC first reported on merger talks between the two companies after the closing bell on Wednesday.

In early trading, the NYSE's stock soared by 31 percent in heavy volume that was more than 12 times its normal average.

The 220 year old NYSE, which bought the Euronext about six years ago, is the world's largest stock exchange. Its listed companies with a combined market capitalization of more than $14 trillion -- approximately the size of the U.S. economy itself.

Technology, however, has altered the terrain for traditional stock market operators. The largest companies have been forced to buy out smaller competitors, as part of efforts to keep pace with rapid electronic trading, and build a footprint in various asset classes that are more profitable than stocks.

The deal will be comprised of about 1/3 cash, and 2/3 stock consideration. But in an unexpected move, the ICE's deal with the NYSE could result in the European arm of the exchange being spun off in an initial public offering -- effectively undoing the Big Board purchase of it in 2006.

In a conference call with investors and reporters, Jeffrey C. Sprecher, the ICE's founder, chairman and CEO, said there were "massive amounts of synergies that we can realize in two years. As markets change we can accelerate quickly," he said, adding that he was "very impressed" with the NYSE-Euronext's business.

The ICE said as part of the deal, it was committed to preserving the Big Board's iconic headquarters on Wall Street, and may explore floating the Euronext business "if market conditions permit."

If successful, the deal would give the ICE a toehold in stock trading, an area dominated by the NYSE-Euronext. It also merges the ICE's futures, over the counter and derivative trading -- areas where the NYSE has long sought to extend its reach.

The deal is the latest manifestation of the merger craze that has swept the exchange operating space over the last decade, and dramatically changed the industry. In a conference call, NYSE-Euronext CEO Duncan Niederauer stated as much, saying "the winners in our space have to adapt quickly."

ICE's offer for the iconic Big Board represents one of the largest deals in the stock exchange space since the NYSE itself merged with Euronext in 2006, a culmination of the NYSE's strategy of strategic purchases of smaller competitors.

Last year, the NYSE failed in its $10 billion bid to buy the Deutsche Bourse, one of Europe's largest and most venerable exchanges, when the deal failed to pass regulatory muster.

At the time, the Nasdaq-OMX joined forces with the ICE to stage an $11 billion hostile takeover bid for the NYSE-Euronext. The Big Board summarily rejected the offer, labeling it "strategically unattractive."

In 2011, Niederauer said, the ICE's alliance with the Nasdaq to buy the NYSE "wasn't actionable. It was a different market environment," he said. However, the CEO added that he always felt that the partnership was possible. "This is a combo that would make a lot of sense for a host of reasons."

The NYSE first went public in 2005 in a reverse merger with electronic trading upstart Archipelago Exchange. That transaction was the start of a prolonged period of decline for the exchange's floor trading operation, which in recent years has been cut in half by industry consolidation and the rise of automated, instantaneous trading.