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NYSE, Euronext courtship on the rocks

Bob Moon Jun 15, 2006

KAI RYSSDAL: Just a couple of weeks ago the head of the New York Stock Exchange, John Thain, said the first transatlantic stock exchange was a done deal. The NYSE would spend $10 billion to buy Euronext. It owns four big European exchanges. Word today the deal’s coming undone. Thain might have to cough up more money because his share price has been slipping. And politicians in Europe are weighing in against it. Marketplace’s Bob Moon has been looking into how much the Big Board ought to worry about that rising political opposition.

BOB MOON: American regulators have reassured the Europeans that the proposed merger would not subject their markets or their listed companies to U.S. regulations. But that hasn’t been enough to slow growing political momentum against the deal on the other side of the Atlantic.

This week, Italy’s prime minister added his support to a merger between Euronext and a German exchange. The president of France and the head of the European Central Bank have also gone on record saying they favor the European deal.

Bill Cline follows global capital markets for Accenture. He argues the marketplace, and not politicians, should decide:

BILL CLINE:“We certainly expected various parties to weigh in, but I think it would be unfortunate if political considerations outweighed market forces. I think there’s a lot of really fundamental business reasons why this makes sense.”

But Ben Steil, director of international economics at the Council on Foreign Relations, says the NYSE can’t ignore the politicians:

BEN STEIL:“I think the NYSE always has to be concerned when political intervention comes at such a high level. Even shareholders are concerned about how the politicians are going to react, because that’s going to influence the profitability of any combined enterprise going forward.”

There’s yet another complication. The NYSE might have to come up with more cash since its share price has sunk since the deal was announced. Sang Lee watches the exchanges for Aite Group. He says the NYSE may have no choice:

SANG LEE:“In the long run, it is the right decision for the NYSE. Doing nothing is not an option at this point.”

Otherwise, Lee says the NYSE risks being locked out of the consolidation of global markets.

In New York, I’m Bob Moon for Marketplace.

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