The European Commission is prohibiting the planned merger between Deutsche Börse AG and NYSE Euronext because, based on its definition of the market for derivatives trading, it considers the merger to be inadmissible under competition law.
In a statement released today, the Executive Board of Deutsche Börse AG has expressed its disappointment with the commission’s decision:
“This is a black day for Europe and for its future competitiveness on global financial markets. The EU Commission’s decision is based on an unrealistically narrow definition of the market that does no justice to the global nature of competition in the market for derivatives. The over-the-counter (OTC) derivatives market, the major part of the market as a whole, is completely precluded. We therefore regard the decision as wrong.
“What’ s more, it is inconsistent and runs counter to the aim of extending financial market regulation to the OTC derivatives market which the Commission is simultaneously pursuing. In its decision, the European Commission also takes a contrary stand to the assessment of the derivatives market arrived at in the USA back in 2007. There, the two Chicago exchanges CME and CBOT were allowed to merge to form the largest globally operating derivatives exchange.”
Reto Francioni, Chief Executive Officer of Deutsche Börse AG, says: “Prohibiting the planned merger prevents the creation of a European-based, globally competitive exchange group. The merged exchange group would have been the ideal partner to European regulators when it came to providing support in establishing standardised, transparent and stable markets in Europe and worldwide.
“Deutsche Börse is well equipped and strong enough to grow further and be successful, even without the merger, and will continue to work in partnership with government to promote the stability and integrity of markets.
“In 2011, we paved the way for our further growth with a binding agreement for the acquisition of 100 percent of shares in Eurex. As one of the world’s leading exchange groups with an integrated business model that sets us apart from many competitors, we are outstandingly positioned – including in the international arena – and are well received on the capital market. On behalf of the entire Executive Board, I would like to thank all employees who have worked with great commitment to bring about the merger over the last twelve months.”
The Executive Board has assured the Chairman of the Supervisory Board that it will ensure the desired continuity and further advance the company also in light of the EU Commission’s prohibition.
The European Commission’s decision stands in contrast to approval already obtained from many other major regulators. Approval had already been granted in Germany by the Bundesamt für Finanzdienstleistungsaufsicht (BaFin), in Luxembourg by the Commission de Surveillance du Secteur Financier (CSSF), and in the USA by the Committee on Foreign Investment in the United States (CFIUS), the Department of Justice (DOJ) as well as the Securities and Exchange Commission (SEC). Furthermore, to obtain the European Commission’s approval despite what both companies considered to be an erroneous market definition, Deutsche Börse AG and NYSE Euronext had offered substantial concessions within economically reasonable bounds. The shareholders of both companies supported the planned merger with an overwhelming majority.
In line with market expectations, Deutsche Börse delivered solid growth in sales revenue in 2011 compared with 2010. Despite spending some EUR120 million on further expansion of its core business and around EUR80 million in project expenses during 2011 to bring about the planned merger, and even excluding special effects in 2010, Deutsche Börse substantially boosted earnings relative to the prior year. The positive performance trend from the first nine months was thus sustained through the last quarter. Preliminary results for 2011 will be published as planned on February 13 and explained at the annual press briefing on 14 February 14.
Deutsche Börse Group will continue its growth strategy for geographic expansion and at product level and will pursue ongoing development of its integrated business model. The company consequently expects to continue the growth trend sustained over the last three years in 2012.
Reto Francioni says: “We associate 2012 with positive growth expectations for Deutsche Börse AG. This assessment is based on the assumption that the euro zone rigorously maintains the stabilisation trajectory it has already embarked on. Completing the acquisition of the SIX Group’s 15 percent stake in Eurex in 2012, which will still go ahead without the merger with NYSE Euronext, will also contribute around EUR100 million revenue.”
Further considerations and details on business performance in 2012, including distributions to shareholders, will be given by the Executive Board in consultation with the Supervisory Board on presentation of the preliminary results for 2011 at the annual press briefing on 14 February.
Francioni says: “On behalf of my colleagues on the Executive Board, I would like to thank all involved who worked with great commitment to bring about the merger over the last twelve months. My thanks also go to our shareholders, who gave us outstanding support with their near-unanimous approval of the merger. Finally, we would like to thank our colleagues at NYSE Euronext for working with us in a spirit of partnership.”
