Deutsche Boerse AG (DB1) and NYSE Euronext (NYX) have indicated how they will seek to counter concerns submitted to European Union regulators by competitors and customers over their $9 billion merger.
The European Commission must decide by today whether to open an in-depth investigation of the buyout’s ramifications, which can last as long as 90 working days. Regulators will weigh complaints from the firms’ biggest customers, including traders, banks and brokers, that the combination may harm competition.
Gregor Pottmeyer, Deutsche Boerse’s chief financial officer, last week tried to allay concerns from the Association for Financial Markets in Europe that the exchanges won’t pass on a “fair share” of about 400 million euros ($572 million) in cost savings to customers, even as he said the exchange expects a formal EU antitrust complaint about the deal by October.
Two “strong arguments” on how customers will benefit from the business combination are savings from lower capital requirements for the combined company and cross-margining to reduce how much cash investors must post to clearinghouses to back their trades, Pottmeyer said on a July 29 conference call.
Regulatory approval is the last hurdle for the deal that would create the largest owner of equity and derivatives markets. Joaquin Almunia, the EU’s competition chief, said in March a longer probe into the “complex deal” is likely.
Officials will give more weight to customers’ worries than complaints from rivals “because they are usually the entities most affected,” said Matthew Hall, a lawyer at McGuire Woods LLP in Brussels.
Regulators may treat complaints from rivals Nasdaq OMX Group Inc. (NDAQ) and London Stock Exchange Group Plc (LSE) “with a pinch of salt,” Hall said. A formal antitrust complaint sent to the companies “isn’t going to be good news,” because it may show that the exchanges haven’t resolved the EU’s antitrust concerns.
NYSE Euronext’s Chief Executive Officer Duncan Niederauer said Aug. 2 regulators were likely to focus “on what conditions may be placed on us, not how to make or break the deal.” He said he had “absolute confidence” EU regulators will consider the source of objections to the merger when reviewing them.
“Our competitors have been the most vocal about their concerns regarding our pending business combination,” Niederauer told analysts.
A series of planned exchange tie-ups around the world have run into trouble with regulators this year. Nasdaq and IntercontinentalExchange Inc. (ICE) abandoned their unsolicited bid for NYSE Euronext in May after the U.S. Justice Department threatened an antitrust suit. Singapore Exchange Ltd. (SGX)’s $8.8 billion bid for ASX Ltd. (ASX) fell apart in April after Australian Treasurer Wayne Swan said the deal wasn’t in the national interest.
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