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ICE Buys NYSE Euronext: Hot Or Not?

Earlier in the month, Atlanta, Georgia-based IntercontinentalExchange (ICE) and New York-based NYSE Euronext announced their plans to merge by releasing a joint statement.

Deal Announced 
NYSE Euronext, which operates the 200-year-old stock and derivatives

Earlier in the month, Atlanta, Georgia-based IntercontinentalExchange (ICE) and New York-based NYSE Euronext announced their plans to merge by releasing a joint statement.

Deal Announced 
NYSE Euronext, which operates the 200-year-old stock and derivatives bourse the New York Stock Exchange, announced that its board had agreed to be purchased by ICE after the board of the Atlanta-based exchange operator made an offer.

According to the statement, the combination of the two companies will result in the creation of a major player offering market participants the ability to trade several financial instruments - including stocks, energy commodities, credit derivatives, interest rate and foreign exchange derivatives and equity derivatives.

Acquisition Terms 
According to the terms of the deal, the transaction was valued at approximately $8.2 billion, and involved stock and cash. ICE offered the New York-based exchange operator $33.12 per share. This amount was the closing price of NYSE Euronext shares on December 19, 2012.

The stockholders of the New York-based exchange operators will have the option to receive their consideration for the deal in the form of either $33.12 in cash per share, 0.2581 common shares of ICE or a combination of $11.27 in cash plus 0.1703 common shares of ICE.

These NYSE Euronext shareholders are capped at taking cash consideration of $2.7 billion and an aggregate total of 42.5 million common shares of ICE. This distribution of cash and stock comprises 67 percent ICE shares and 33 percent cash. The price-per-share of $33.12 is 37.7 percent higher than NYSE Euronext's closing value on December 19, 2012.

Market Trends 
The proposed merger of the exchange operators, which will require approval from federal regulators, is a sign of the new era that these bourses have entered, as the various challenges posed by the market motivates them to consolidate, according to The Guardian.

Exchanges are coping with trading that is becoming increasingly automated, plunging commission for transactions and fierce competition from rival bourses, the media outlet reports. The New York Stock Exchange has insisted on maintaining certain traditions, allowing traders wearing colored jackets to yell and gesture in other ways in order to make transactions.

Charles Geisst, author of Wall Street: A History and a finance professor at Manhattan College, told the news source that "the NYSE has faded in the past few years, for most professionals this is a sign of the times. Trading could take place on the moon right now as long as you have the right communications."

"The NYSE is an icon but it runs the risk of becoming irrelevant, it's just being outplayed by its more technologically savvy competitors," Jack Ablin, chief investment officer at BMO Private Bank, told the media outlet. "When I started out NYSE was the stock market," he stated. "But things are changing at an exponential speed. It's become less and less relevant with every passing year."

Regulatory Challenges 
Since the proposed deal has been approved unanimously by the boards of directors of both exchange operators, it is now up to federal regulators to either allow or block the transaction.

ICE previously teamed up with rival bourse Nasdaq OMX Group to launch a hostile bid for NYSE Euronext, but this effort was thwarted by the U.S. Department of Justice, according The New York Times. NYSE Euronext also agreed to be merged with Deutsche Boerse, but this proposed combination was blocked by the European Union's European Commission.

While we are waiting to find out whether the Justice Department will approve the combination of NYSE Euronext and ICE, is this deal hot or not? 

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