Finer Points of NYSE—Deutsche Boerse

Update: CME's Executive Chairman Terry Duffy tells our Maria Bartiromo that he is focused on his core business, and has not spoken to NYSE Euronext CEO Duncan Niederauer about a merger. He noted that "the world is getting smaller" and predicts more deals ahead.

The NYSE Euronext/Deutsche Boerse press conference: details and comment.

Duncan Niederauer, CEO of the NYSE Euronext , and Reto Francioni, CEO of the Deutsche Boerse, presented a series of slides to journalists assembled in the NYSE boardroom in New York and the DB boardroom in Frankfurt that highlighted the compelling synergies of the deal:

1. A world leader in derviatives

2. The largest venue for capital raising in the world

3. A major provider of technology services

4. A leader in settlement services

Net revenues: $5.41 billion (most of any exchange)

EBIDTA: $2.8 billion (most of any exchange)

Revenues would be broadly diversified:

  • Derivatives: 37%
  • Cash trading/listings 29%
  • Settlement/custody 20%
  • Market data 14%

While freely admitting that cost savings were a major factor in the deal (in a commodity business like cash equities trading, it is about getting scale and maximizing the technology pipes you have), there was also discussion about growth opportunities.

They particularly mentioned Asia. Reto Francioni, the CEO of the Deutsche Boerse, who will be the chairman of the combined company, noted in the press release: "...we expect that the combined group will be a highly attractive partner for capital markets in Asia-Pacific and other parts of the world."

They also mentioned investments in new asset classes, including emissions and energy, and agricultural commodities.

Niederauer was asked about the name of the new company, which has not been announced. He noted it was an emotional decision for everyone and that he hoped to have alternatives in front of the boards in the next 1-2 months.

My take on the name game: they will surprise everyone and announce a generic name that does not have "NYSE" in it. The reason: there will be other mergers (they are already looking to Asia) down the road, and to avoid the endless alphabet soup of names a new name will be best. Expect push-back.

"Niederauer argued that the NYSE Euronext Board is already global, the DB Board is already global, and that the combined shareholders ratio has a decidedly U.S. tilt: 55% U.S., 45% German/U.K./other."

On the (touchy) political risk issue ... I asked Niederauer if he was confident he could convince regulators and politicians of the wisdom of the merger ... particularly since some are outright saying this is a takeover by the Deutsche Boerse.

Niederauer argued that the NYSE Euronext Board is already global, the DB Board is already global, and that the combined shareholders ratio has a decidedly U.S. tilt: 55% U.S., 45% German/U.K./other.

As for the 60/40 ownership split, Niederauer noted that "the ownership split reflects the market cap."

As does the board composition: 9 from DB, 6 from NYSE, plus the Chairman and CEO. Since the Chairman is from the DB and the CEO is from the NYSE, the current split is 10-7, as we reported yesterday ... but that could change. The Executive Committee consists of 4 executives from each company.

No, no ... they're taking over us! One of the first questions to Francioni was from a German reporter who asked what assurances he could offer that the NYSE was not taking over Deutsche Boerse. Francioni also reiterated the balanced board and that "this is not against each other, it is with each other."

One side bar: the sudden resignation of Nasdaq(NDAQ) CFO Adena Friedman is being viewed as a negative for the Nasdaq's short-term prospects of a deal. The thinking is that if Nasdaq was in a midst of a deal, she would not have left. It takes Nasdaq out of dealmaking mode, at least temporarily. NDAQ down 5.5 percent midday.

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