The planned merger between Deutsche Boerse and NYSE Euronext has been blocked by the European Union on Wednesday. The proposed deal, worth almost $10 billion, would have created the world’s largest financial exchange operator. EU’s executive body, the European Commission, said that it was opposed to the merger because it feared that the combined exchange would be a financial behemoth, which would control more than 90 percent of the trading in European derivatives, making it virtually impossible for competitors to offer rival trading systems. Analysts think the decision is not surprising as last month a competition case team recommended the merger should be blocked. The stock market operators are now in talks to end the tie-up.
Early last year, NYSE Euronext and Deutsche Boerse announced plans to merge, which secured approval from the shareholders of both the companies in July. They had been awaiting the outcome of the EU antitrust probe to move forward. Deutsche Boerse AG and NYSE Euronext were hoping that combining their businesses, would have allowed them to compete better with other large exchanges in theU.S. andAsia. The Commission’s decision has dealt a severe blow to their plans.
In a statement issued after the deal was blocked, NYSE Euronext said that it now will focus on its “successful standalone strategy that has delivered strong growth and diversification of its core businesses”. NYSE Euronext’s chairman, Jan-Michiel Hessels, said on Wednesday, “While we are disappointed and strongly disagree with the E.U. decision, which is based on a fundamentally different understanding of the derivatives market, it is now time to move on.”
Reto Francioni, CEO of Deutsche Boerse, in a press conference inFrankfurt, said the ruling was wrong and stood in stark contrast to the 2007 merger of Chicago Mercantile Exchange and Chicago Board of Trade, which at that time had created the largest globally-operating derivatives exchange.
Under the terms of the merger agreement, since the deal could not go through because of opposition from the regulator, neither NYSE Euronext nor Deutsche Boerse will be responsible for paying a break-up fee of 250 million euros. But if either company reaches a merger deal with a different partner within the next nine months, it would have to pay that fee.
The companies may decide to appeal against the commission’s decision and have two months time to do so.