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The Deal: ICE-NYSE Unexpected Merger Success

Portales Partners analyst Paul Gulberg said the deal was on track and would be earnings accretive for ICE, noting NYSE's derivatives Liffe platform would have been the primary asset of interest. "U.S. equity markets are extremely commoditized but ICE has said they'd consider listing or selling the cash equity business," he said.

UBS research analyst Alex Kramm said ICE's stock outperformance reflected greater confidence that synergy targets would be met. "ICE remains our favorite idea in the exchange subsector and we expect the stock to move higher as investors give more credit to the significant earnings accretion expected from the deal," he told clients.

ICE chief executive and chairman Jeff Sprecher said Tuesday on a conference call discussing the exchange's second-quarter earnings that since receiving antitrust approvals, the group had exchanged information far more closely with NYSE Euronext, giving the acquirer renewed confidence that projected cost savings would be realized.

ICE reported second-quarter net income of $153.3 million, or $2.09 per share, up 7% from net income of $143.2 million, or $1.95 per share.

Sprecher said both companies had discussed the organization of a global equity index business. "A meaningful group of equity indices on a common platform are likely to drive growth," he said.

Hintz said the expected spinoff or disposal of the Euronext cash equity business as part of the deal would reduce the new company's reliance on cash equity trading to around 5%. Once completed, this would make the economics of the deal clearer, with ICE then able to lower its average cost per trade through higher volumes and the removal of back-office costs, he said.

The combined ICE-NYSE Euronext would be the third-largest exchange globally behind Hong Kong Exchanges and Clearing and CME Group (CME - Get Report).

NYSE was recently appointed the administrator of Libor, a key benchmark rate that has been tarred by several rate-rigging scandals and was once symbolic of London's rise as a global financial center.

Written by Jane Searle.

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