This post originally appeared on Business Insider.
NYSE-Euronext is a 220-year-old icon of global finance, but its 12 year-old Atlanta-based rival, IntercontinentalExchange (ICE) will buy it for $8.2 billion, according to a deal that has just been announced.
This revelation surprised a lot of people on the Street who thought all the exchange horse trading of 2010-2011 was over. In 2011, for example, the Justice Department blocked ICE and NASDAQ’s attempt to buy the NYSE. NYSE was also stopped from merging with Germany’s Deutsche Borse.
Since 2010, $32 billion worth of attempted exchange merger/purchase deals have failed.
Here are the terms of the NYSE-Euronext ICE deal (from NYSE-Euronext):
“Under the terms of the agreement, which was unanimously approved by the Boards of both companies, the transaction is currently valued at $33.12 per NYSE Euronext share, or a total of approximately $8.2 billion, based on the closing price of ICE’s stock on December 19, 2012. NYSE Euronext shareholders will have the option to elect to receive consideration per NYSE Euronext share of (i) $33.12 in cash, (ii) 0.2581 IntercontinentalExchange common shares or (iii) a mix of $11.27 in cash plus 0.1703 ICE common shares, subject to a maximum cash consideration of approximately $2.7 billion and a maximum aggregate number of ICE common shares of approximately 42.5 million. The overall mix of the $8.2 billion of merger consideration being paid by ICE is approximately 67% shares and 33% cash. The transaction value of $33.12 represents a 37.7% premium over NYSE Euronext’s closing share price on December 19, 2012.
NYSE Euronext shareholders will own approximately 36% of ICE shares post-transaction.”
It’s all an attempt by exchanges to get bigger, more important business in a world of declining trading commissions where big investors (like mutual funds) are turning to private, dark pools to trade.
For its part, NYSE-Euronext has seen its share of trading in stocks listed on the exchange fall from 82% to 21%, according to Bloomberg. And while it does own the largest exchanges by value of listings in the U.S., and parts of Europe, it needs to grow its share in a business that has become more important than trading simple stock and stock options — trading derivatives.
From January to September of this year, NYSE-Euronext made $357 million, down 32% from the same period last year.
That’s where ICE comes in. It’s a commodities futures exchange that especially focuses on energy futures. Since NYSE-Euronext doesn’t have that business, the Justice Department may not consider this merger an anti-trust violation.
The trading of NYSE-Euronext stock were halted as the deal was being discussed, but before that it seemed like the market liked the idea of the ICE buying NYSE-Euronext as their shares were soaring.
For the press release and benefits of the transaction, continue reading at Business Insider.