NYSE Euronext boosts ETF and options business by acquiring American Stock Exchange
NYSE Euronext, parent of the New York Stock Exchange and the Paris, Brussels and Amsterdam exchanges, has agreed to acquire the American Stock Exchange in a deal that creates an undisputed leader in US exchange-trade funds as well as significantly enhancing NYSE's position in options, closed-end funds, structured products and cash equities.
Both companies' boards of directors have approved the acquisition. Subject to approval by Amex members and regulatory approval, including from the Securities and Exchange Commission and the US Department of Justice, the transaction is expected to close in the third quarter of this year.
Under the agreement, NYSE Euronext will pay USD260m in common stock for the Amex, whose members will also be entitled to additional shares based on the net proceeds from the expected sale of the Amex's lower Manhattan headquarters.
NYSE Euronext says the acquisition of the Amex will give it leadership in ETF listings and trading, by adding 381 current Amex ETF listings to the 240 ETFs currently listed on the NYSE Arca electronic trading platform.
The benefits to the NYSE also include a second US option exchange licence, enabling it to operate a dual market structure that offers customers a choice between price-time priority on NYSE Arca and the Amex's traditional market-maker model. The additional volume will make NYSE Euronext's US options business the country's third largest options marketplace.
The Amex will bring the group a third US cash equities exchange, in addition to the NYSE and NYSE Arca, and create a leading venue for listing and trading closed-ended funds and structured products, with 545 listings on the Amex being added to more than 1,000 on the NYSE.
NYSE Euronext says it expects to achieve annualised run rate cost synergies of more than USD100m within two years, including technology, data centre and staff integration, consolidation of professional and contract services and vendors. It will relocate the Amex's trading floor operations to the NYSE trading floor.
'The addition of the American Stock Exchange to the NYSE Euronext family is highly beneficial for our customers and shareholders, and demonstrates our ongoing commitment to growing our business and product lines,' says NYSE Euronext chief executive Duncan L. Niederauer.
'NYSE Euronext is the established leader in global financial-market consolidation, offering the most attractive and diverse array of products of any global exchange. This transaction is consistent with our strategic objectives and will strengthen our competitive position in the US, produce significant operational efficiencies, and create new business opportunities.'
Neal Wolkoff, chairman and chief executive of the American Stock Exchange, says: 'The Amex, with its diverse business lines and specialisation in launching innovative new products, is pleased to join NYSE Euronext and be part of the world's leading multi-asset global exchange.'
The Amex, which had 471 employees at the end of last year, recorded operating revenues of USD178m in 2007 and generated a pre-tax net loss of some USD36m. Upon completion of the acquisition, NYSE Euronext expects the Amex to operate to break even for 2008 and add to earnings in 2009.
Lehman Brothers is financial advisor and Wachtell, Lipton, Rosen & Katz is legal advisor to NYSE Euronext, while the Amex is represented by Morgan Stanley as financial advisor and Milbank, Tweed, Hadley & McCloy, and Paul, Weiss, Rifkind, Wharton & Garrison as legal advisors.
NYSE Euronext, which brings together six cash equities exchanges in five countries and six derivatives exchanges in six countries, is a world leader for listings, trading in cash equities, equity and interest rate derivatives, bonds and the distribution of market data, with a combined USD30.3trn total market capitalisation of listed companies and average daily trading value of some USD139bn as of September 30.
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