Back to top

Analyst Blog

In an effort to simplify the merger process, both IntercontinentalExchange Inc. (ICE - Analyst Report) and NYSE Euronext Inc. are making the necessary modifications in the business structures.In Dec last year, IntercontinentalExchange agreed to acquire NYSE Euronext for $8.2 billion.

According to Reuters, IntercontinentalExchange has filed a regulatory statement to form a new holding company – ICE Group Inc. Subsequently, both IntercontinentalExchange and NYSE Euronext will operate as subsidiaries under ICE Group. While the financial terms of the merger remain unaltered, each common equity shareholder of IntercontinentalExchange willown the right to possess one share of the new holding company.

Terms of the Merger

The $8.2 billion deal is based on $33.12 per NYSE share, which represents a 37.7% premium on NYSE’s closing price on Dec. 19. Moreover, the investors at NYSE have the option of taking cash payment of $33.12 a share or receive 0.2581 shares of IntercontinentalExchange for each NYSE share.

A third option includes a mix of $11.27 in cash along with 0.1703 IntercontinentalExchange shares per NYSE share, although this funding is restricted to a maximum cash outlay of $2.7 billion and a maximum stock outlay of 42.5 million shares of IntercontinentalExchange.  

Post acquisition, the 220-year old NYSE will own 36% in the 12-year old IntercontinentalExchange, while four members of the former will share the latter’s board.

Consolidating Businesses to Gain Efficiency

Both the parties are vigorously working toward making the merger sail through the regulations in the US and Europe. Last week, Bloomberg also reported that IntercontinentalExchange is in the final leg of its discussions with the regulators to spin off the 4 European exchanges owned by NYSE Euronext in Lisbon, Paris, Amsterdam and Brussels.

All these exchanges are part of Euronext NV that was integrated with NYSE Group Inc. in 2007 to form NYSE Euronext. However, the deal still requires the approval from the European regulators on antitrust issues.

Overall, IntercontinentalExchange is working on a strategy that would help the merger gain a nod from the regulators soon. Moreover, the company aims to leverage NYSE’s efficiencies and global presence productively, thereby positioning it well to tap growth opportunities and bring forth a strong competitive advantage. The merger is expected to culminate by the second half of this year.

While NYSE Euronext carries a Zacks Rank #2 (Buy), IntercontinentalExchange holds a Zacks Rank #3 (Hold). Other strong performers in the financial sector include Euronet Worlwide Inc. (EEFT - Snapshot Report) and Moody’s Corp. (MCO - Analyst Report), both of which carry a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.