Deutsche Boerse Seeks EU Approval for Euronext Merger (Update2)

2006-10-13 13:30 (New York)

(Adds Euronext comment in sixth paragraph.)

By Nandini Sukumar

Oct. 13 (Bloomberg) -- Deutsche Boerse AG, trying to garner

support from EuronextNV shareholders for a merger of Europe's two

largest exchanges, asked the European Commission to approve its

9.77 billion-euro ($12 billion) bid for the French company.

The exchange today ``formally notified the European Commission

for merger review,'' Deutsche Boerse said in a statement. The

Frankfurt-based company has spent three months providing background

on its offer and will ``continue to work closely with the

authorities for a timely completion of the review process.''

Euronext, Europe's second-largest stock exchange by market

value, in June rebuffed Deutsche Boerse's bid in favor of an offer

from NYSE Group Inc., owner of the New York Stock Exchange.

Deutsche Boerse has pursued its plan and now hopes to create a

federal European exchange that includes Italy's Borsa Italiana SpA.

``Deutsche Boerse is putting the pressure on and showing it's

still alive,'' said Angela Knight, chief executive officer of the

Association of Private Client Investment Managers and Stockbrokers.

``Euronext is always saying there is implementation risk and now

Deutsche Boerse is trying to show there may not be.''

Shares of Deutsche Boerse fell 1.07 cents, or 0.8 percent, to

127.72 euros at the close of trading in Frankfurt. Euronext stock

was little changed at 79.85 euros. Shares of NYSE dropped 1.8

percent to $73.62 in New York Stock Exchange composite trading as

of 1:28 p.m.

U.S. Preference

Euronext said today it will pursue the merger with NYSE.

Combining with ``a U.S. company represents less antitrust issues,''

Catherine Langlais, Euronext's general counsel said at a conference

today in Barcelona. She declined to comment directly on Deutsche

Boerse's statement, saying only that the company would work toward

a combination with NYSE ``as soon as possible.''

NYSE Chief Executive Officer John Thain told reporters Oct. 5

that he remains committed to seeking shareholder approval for the

Euronext merger in December and completing the transaction during

the first quarter. Rich Adamonis, a spokesman for NYSE, today

declined to comment on Deutsche Boerse's filing.

The notification with the commission, the EU's antitrust

regulator in Brussels, sets in motion at least a five-week review

of the merger. The commission has the power to block or force

changes to mergers between companies with combined global sales of

5 billion euros and sales of 250 million euros each.

The regulator can approve the deal, open a four-month

investigation or refer it to national regulators.

Three-Way Deal

``It's a high-stakes game'' for Deutsche Boerse, Graham Bishop,

a consultant on financial regulation, said in an interview today.

The notification, and the possibility of winning EU clearance,

makes it harder for Euronext to dismiss the offer as unworkable. On

the other hand, regulators are sure to raise some objections.

The commission likely would require Deutsche Boerse to sell

some units to avoid dominance in derivatives trading or post-trade

clearing and settlement, Bishop said. As recently as May, the

agency warned that it was concerned about Deutsche Boerse's

``vertical silo,'' owning both an exchange and post-trade services.

Clearing is the process of verifying that a buyer has the

funds to execute a trade. Settlement is the execution of the

exchange of money for securities.

Deutsche Boerse said today its proposal for a combination with

Euronext ``would only represent the first step in achieving this

tri-party combination.'' The company signed a letter of intent with

Borsa Italiana to create a pan-European stock exchange with a

``federal model,'' increasing ``momentum for a European solution.''

The company also rejected the idea of selling its stock

trading operations to a merged Euronext and NYSE, reiterating that

its proposal for a transaction with the French company includes

plans to run European stock trading out of Paris.

--With reporting by John Rega and Matthew Newman in Brussels, Julia

Werdigier in London and Yalman Onaran in New York. Editor: Snyder.

Story Illustration: For a graph comparing the performance of

of NYSE Group with the FTSE/Mondo Visione Exchanges index, which

tracks 16 other exchanges, see {NYX US <Equity> COMP D MV1X

<Go>}.

To contact the reporters on this story:

Nandini Sukumar in London at (44) 20 7673 2479 or