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Another Battle for the NYSE

An exchange seat-owner files suit, saying the merger with Archipelago undervalues his stake.


New York Stock Exchange's

proposed merger with the

Archipelago Exchange


is heading to court.

A prominent NYSE seat holder on Monday filed a purported class-action seeking to block the $4 billion deal. William Higgins' suit contends the deal undervalues the NYSE and deprives the Big Board's 1,366 seat holders from reaping "the full value of their holdings."

The lawsuit, filed in New York state court, also alleges that

Goldman Sachs


has a conflict of interest in the merger because it served as an adviser to both the NYSE and Archipelago and owns a 15% equity stake in the electronic stock exchange.

The NYSE said it had no immediate comment on the lawsuit. A Goldman Sachs spokesman could not be reached for comment.

Higgins is the president of the Association of NYSE Equity Members, a group that claims to represent about 400 seat holders. Higgins' association, however, was not named as plaintiff in the litigation.

The filing of the lawsuit comes three weeks after the NYSE and Archipelago stunned Wall Street on April 20 with news of their proposed merger.

In the deal, each seat holder would receive $300,000 in cash and a stake in the newly merged company, which will be called the NYSE Group. NYSE members will get roughly 70% of the shares allocated by the new company, with the rest going to Archipelago shareholders.

"The 70%/30% split is patently unfair to NYSE seatholders because it significantly undervalues the NYSE and thus, does not reflect the equity value that the NYSE will contributed to the proposed merger," according to the complaint.

The lawsuit also contends the deal unfairly penalized NYSE seat holders, because they "will be precluded from selling their ... shares for up to five years." Meanwhile, the lawsuit contends that "the majority of Archipelago's shareholders will not be bound by any lock-up period whatsoever."

The lawsuit could add some weight to a rival bid for the NYSE that

Home Depot

found Kenneth Langone is trying to put together. Langone, a controversial former NYSE director, also has claimed the Big Board's seat holders are getting short-changed in the transaction.

But many on Wall Street are wary of Langone, because he is close friends with former Big Board Chairman Richard Grasso and helped win approval for Grasso's outsized $140 million pay package.

Shortly after Langone made his intentions know, Higgins said he and his association would be receptive to another bid.