Deutsche Boerse AG,operator of the Eurex futures platform and Frankfurt Stock Exchange,agreed to buy New York Stock Exchange parent NYSE Euronext for $9.53 billion in a deal that creates the worlds largest owner of equities and derivatives markets. Deutsche Boerse will swap one share of its own stock for one share in the new company,while every NYSE Euronext share will be exchanged for 0.47 share,according to a statement on Tuesday. Deutsche Boerse will control 60% of the new corporation. Reto Francioni,the chief executive officer of Frankfurt-based Deutsche Boerse,will serve as chairman. Duncan Niederauer,CEO of New York-based NYSE Euronext,will keep that title at the combined organisation. While the merged entity will list corporations with about $15 trillion in value,more than any other exchange,what may prove more lucrative is ownership of growing venues for trading futures and options,said Rich Repetto,an analyst at Sandler ONeill & Partners LP. The union follows Singapore Exchanges October bid for ASX,which runs the Australian stock market,and London Stock Exchange Groups agreement last week to buy Canadas TMX Group. The Deutsche Boerse-NYSE deal makes sense because there has been a tremendous amount of growth in the derivatives area, Keith Wirtz,who helps oversee $18 billion as chief investment officer for Fifth Third Asset Management in Cincinnati,including NYSE Euronext shares,said on Monday. Its not the first and wont be the last deal in that industry. Deutsche Boerse will get 10 of 17 seats on the combined companys board,according to Tuesdays statement. The deal values NYSE Euronext at 8.3 times earnings before interest,taxes,depreciation and amortisation,according to data compiled by Bloomberg. That compares with 9.35 times Ebitda for TMX and 18.45 for ASX,the data show. About 37% of revenue at the joined company will come from derivatives trading and clearing,making it the largest unit based on 2010 revenue,according to Tuesdays statement. Cash listings along with trading and clearing accounted for 29%,settlement and custody made up 20%,and market data and technology services was 14%,the statement said. NYSE Euronext shares fell 3.6% to $38.04 at 9:33 am in New York,while Deutsche Boerse slipped 0.9% to 60.77 euros. NYSE Euronext said last week that derivatives revenue climbed 14% in 2010,while cash equities fell 10%. By 2013,NYSE Euronext may generate more than 50% of its earnings from options and futures,according to Ed Ditmire,an analyst at Macquarie Group Ltd. in New York,who has an outperform rating on the stock. Derivatives are financial instruments used to hedge risks or speculate. They can be based on an underlying asset such as stocks,bonds,currencies or commodities,or linked to specific events like changes in interest rates.
