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NYSE, Deutsche Boerse Merger Rejected: Report

NEW YORK ( TheStreet) - The European Union's competition authority has rejected a merger between NYSE Euronext (NYX) and Deutsche Boerse, according to Dow Jones, which cited an unnamed senior European Union official.

The proposed deal would form the largest stock and derivatives exchange in Europe and one of the largest in the world.

If the EU were to block the merger, it would cut against a December approval by the Department of Justice, contingent on a divestiture plan. The recommendation to reject the tie up will now face a 27-member European Commission competition panel headed by Joaquín Almunia with a Feb. 9 deadline for a formal decision.

The DoJ approved the $9 billion merger between the two exchanges when it was announced in February 2010, contingent on divestiture of Deutsche Boerse's 31.5% stake in Direct Edge, the fourth largest stock exchange operator in the United States. However, because the merger brings together two of the biggest players in European derivatives and exchange traded funds, it's the EU's antitrust approvals that many see as key.

The New York Times is reporting that Duncan Niederauer, CEO of NYSE Euronext and Reto Francioni of Deutsche Börse are slated to meet in New York to discuss the merger on Wednesday. Separately, Sandler O'Neill wrote in a research report that NYSE Euronext may be worth $30 a share as a standalone, if the merger were to fail.

NYSE Euronext shares rose over 4.5% to $27.79 in Wednesday trading on reports of the potential European regulatory opposition. Still, shares sit below the $36.09 a share price that Deutsche Boerse offered for NYSE Euronext -- signaling continued uncertainty over the deal and deterioration in the value of the $9 billion merger price.

For more on NYSE Euronext shares, see Murray Stahl's portfolio at Horizon Asset Management.

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