Bidding war for European stock exchanges heats up

23 May 2006

Deutsche Boerse, the German stock exchange operator, has made an over $11 billion bid for the Paris-based exchange Euronext. The bid is at a premium to the current market price of Euronext and shareholders of Euronext are being offered €7.72 in cash and 0.68 of a share in Deutsche Boerse in exchange for every share held.

The part-cash, part stock offer betters the $10.2 billion bid made by NYSE Group, operator of New York Stock Exchange, earlier this week.

Euronext operates electronic equities exchanges in Paris, Amsterdam and Brussels and a futures and derivatives exchange in London. If Deutsche Boerse is successful in its bid, it would emerge as the largest European exchange ahead of LSE.

US-based exchanges are trying to acquire exchanges based in Europe to negate strict regulations in the US. The Sarbanes-Oxley Act requires executives of publicly traded companies to certify financial statements and controls, which has made listing in US exchanges relatively unattractive for overseas companies.

However, regulation of listed companies is comparatively more lenient in European countries. Both NYSE and NASDAQ made attempts to acquire the London Stock Exchange (LSE) earlier this year. Deutsche Boerse and Euronext were also interested in LSE.

An unsolicited bid from NASDAQ was spurned by LSE, terming the offer as too low. But, NASDAQ managed to acquire a sizeable stake in LSE which was raised to 25 per cent earlier this month. This would help NASDAQ block any rival bid by NYSE or other large exchanges for LSE.