NYSE Shareholders Tell Niederauer at Meeting to Get Better Takeover Price

NYSE Euronext (NYX)’s shareholders told Chief Executive Officer Duncan Niederauer that they’re not getting enough compensation from his agreement to sell the company to Deutsche Boerse AG. (DB1)

Owners re-elected all NYSE Euronext directors with “well over 80 percent” support at the exchange operator’s annual meeting today. Niederauer and Chairman Jan-Michiel Hessels told shareholders that they haven’t met with Nasdaq OMX Group Inc. (NDAQ) and IntercontinentalExchange Inc. (ICE) because their unsolicited joint bid isn’t legitimate.

“Their request for a meeting is a tactic principally designed to be disruptive,” Hessels said. The Deutsche Boerse “offer has real value and is executable. Nasdaq OMX-ICE is an empty vessel. It looks nice, but there is nothing in there.”

NYSE Euronext shareholders will vote on the Deutsche Boerse deal on July 7. Owners controlling at least half of NYSE Euronext must back the transaction, compared with 75 percent at Deutsche Boerse. The 80 percent approval level for the board members is “rather low,” a signal that the Deutsche Boerse deal may not have full shareholder support, according to Ted Allen, head of publications and governance counsel at ISS Proxy Advisory Services.

Director Approvals

Standard & Poor’s 500 Index companies have approved directors with an average 96 percent support level in 2011, according to ISS, the shareholder advisory unit of New York- based MSCI Inc. Last year, NYSE Euronext owners re-elected all but one director with 96 percent approval. The other director received 91 percent of the votes, Allen said.

“It’s hard to know exactly what motivated them to withhold support from NYX’s directors, but it appears that some shareholders were not happy by the board’s rejection of the Nasdaq/ICE offer,” he wrote in an e-mail to Bloomberg News.

Speaking to a room of about 250 people at the New York Stock Exchange in downtown Manhattan, Niederauer told holders they should vote in July for Frankfurt-based Deutsche Boerse’s $38.66-a-share agreement to purchase the company. The offer from Nasdaq OMX and ICE is valued at $42.58, or 10 percent more, as of 4:10 p.m. New York time today.

Robert Greifeld and Jeffrey Sprecher, the CEOs of New York- based Nasdaq OMX and ICE of Atlanta, have met with NYSE Euronext shareholders since announcing their bid on April 1, which NYSE Euronext’s board has twice rejected. Bill Miller, the chief investment officer of Legg Mason Capital Management Inc. in Baltimore, said yesterday that the refusal to meet is inconsistent with Niederauer’s obligations.

‘Maximize Value’

“It is in the shareholders’ interest that the board work to maximize value for owners,” Miller, whose mutual-fund company is the fifth-biggest NYSE Euronext holder with 7.48 million shares, said in an e-mailed statement to Bloomberg News yesterday. “We don’t see how being unwilling to meet with Nasdaq furthers that goal.”

When rejecting the Nasdaq OMX-ICE offer, NYSE Euronext’s board said the combination would face too many hurdles to win approval from antitrust regulators and would lead to the company having too much debt. Kenneth Steiner, who owns about 1,000 NYSE Euronext shares, said at today’s meeting that the rival bid is too valuable to ignore.

“We have our shares now being sold or converted at a very low and cheap price, and a complete lack of any kind of meaningful premium,” Steiner told Niederauer and Hessels. “I believe that there is a lack of consideration and/or the ignoring of alternative bids and transaction possibilities, which we didn’t even have the opportunity to consider as shareholders.”

‘Protecting Their Deal’

Directors “appear as if they are protecting their deal rather than acting in the best interest of their shareholders,” Greifeld said in an April 21 statement.

NYSE Euronext’s five biggest owners as of Dec. 31 -- T. Rowe Price Group Inc., BlackRock Inc. (BLK), State Street Corp. (STT), Vanguard Group Inc. and Legg Mason Inc. (LM) -- controlled 22 percent of the company’s stock, according to data compiled by ISS. At today’s meeting, shareholders also approved a proposal giving two or more owners with stakes totaling 10 percent the right to call special meetings.

Paying Attention

“Neither of these deals is without risk,” Ian McDonald, a Baltimore-based U.S. exchanges analyst at T. Rowe Price, said on April 10. The “spread between the offers seems quite large even if it was obvious that one deal was riskier than the other. Shareholders can’t and hopefully won’t ignore that.”

Heather McDonold, a spokeswoman for T. Rowe Price in Baltimore, Alicia Curran of Boston-based State Street, and Jim Marren of New York-based BlackRock declined to comment yesterday. John Woerth of Vanguard in Valley Forge, Pennsylvania, didn’t respond to an e-mail message.

“If I were competing with us, I’d want to disrupt this, too,” Niederauer said today of Nasdaq OMX and ICE’s attempt to snatch NYSE Euronext away from Deutsche Boerse.

Deutsche Boerse and NYSE Euronext plan to combine into a Dutch holding company, with each Deutsche Boerse share swapped for one share of the new corporation. NYSE Euronext owners would get 0.47 share for each of their shares. Niederauer warned that raising the ratio might result in Deutsche Boerse shareholders rejecting the deal.

“Let’s not be penny-wise and pound-foolish,” Niederauer said today. “We would hate to miss out on the accelerating opportunity because we just got a touch too greedy on the ratio.”

To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net; Nina Mehta in New York at nmehta24@bloomberg.net

To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net; Andrew Rummer at arummer@bloomberg.net

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