Shares of the
received yet another push upward after Deutsche Boerse, its archrival in the bid for Euronext, withdrew its offer for the Paris-based exchange.
The stock of the parent company to the
New York Stock Exchange
has risen 57% since the beginning of September, following what investors saw as the start of a more profitable and efficient company. Although the stock dipped as much as 3% in early trading on Wednesday, it recovered in the afternoon. Shares were up 47 cents, to $93.50.
"The Street was expecting that New York was likely going to win the bid for Euronext," says Josh Elving, an analyst at Piper Jaffray. "But it is making investors take a step back and actually think about how they're valuing the stock, given that the potential win of Euronext is no longer a catalyst."
Talk of consolidation in the exchange world has become all the rage of late. The NYSE's plan to complete a trans-Atlantic merger with Euronext is the most ambitious deal to emerge. But last month the
Chicago Mercantile Exchange
announced it was acquiring cross-town rival
Chicago Board of Trade
in a deal worth $8 billion.
Speculation continues that next year the
Nasdaq Stock Market
will renew its efforts to bid for the London Stock Exchange, of which Nasdaq currently owns a 25% stake.
Rich Repetto, an analyst at Sandler O'Neill & Partners, says the Deutsche Boerse's decision to abandon its Euronext bid is a positive development for the NYSE because the Big Board will no longer have to consider upping the proposed acquisition price.
But Elving says that because of the run-up in NYSE's stock, the exchange will end up paying about $14 billion, about $4 billion more for Euronext than originally proposed.
NYSE and Euronext agreed to merge their two stock markets in June, through a stock and cash deal worth $10 billion at the time. Under its new name NYSE Euronext, the combination creates the world's largest equities exchange with a market cap of around $20 billion. The total market cap of listed companies on the combined exchange will be $27 trillion, with average daily trading volume of about $100 billion, the companies say.
In a statement Wednesday, Reto Francioni, Deutsche Boerse's CEO said: "We are convinced that, in our industry, mergers can only be successful with the support of both management teams and the industry. We have invested time and commitment but it is part of our responsibility to recognize when further effort doesn't make sense."
Now that Deutsche Boerse has withdrawn its offer for Euronext, it will likely be on the lookout for another exchange to snap up. Some observers say that the Nasdaq could be a target.
"Just look at the multiples. Deutsche Boerse trades at a pretty significant multiple premium to Nasdaq and that could lead to some sort of arrangement," Elving says.
Shares of Nasdaq were trading at $37.77, down 98 cents. A spokesman for the exchange did not immediately return a call for comment
Meanwhile, the London, Big Board and Nasdaq all got news Wednesday that they could face more competition when it comes to executing trades. Seven big investment banks say they plan to launch a European stock-trading platform that will circumvent the exchanges by providing efficiencies and lowering costs. The seven include