Deutsche Boerse Pledges Cost Control, No ‘Big’ Mergers

Deutsche Boerse AG (DB1), the German exchange blocked from buying NYSE Euronext by European regulators in February, pledged to keep costs under control as it takes a break from entering into “big” mergers.

The company will generate savings of 20 million euros ($27 million) this year to achieve financial targets 12 months ahead of schedule and will meet 2012 operating cost guidance of no more than 930 million euros, Chief Financial Officer Gregor Pottmeyer told analysts on a conference call today.

The exchange said it expects its litigation over the European Union’s rejection of its takeover of NYSE Euronext to last as long as three years. It doesn’t plan on making “big, international” deals in the next 18 months as regulators don’t support them, Pottmeyer said.

“We continue to work on permanent efficiency improvements to continue the excellent cost management track record,” he said. “We will look opportunistically but are focused on organic growth.”

Deutsche Boerse reported late yesterday that first-quarter net income dropped 31 percent to 146.2 million euros as trading volumes faltered. The shares advanced 3.9 percent to 48.40 euros at the close of trading in Frankfurt as it pledged to control costs and indicated a dividend payout ratio of at least 40 percent of earnings.

NYSE Earnings

NYSE Euronext, which reports earnings next week, and Frankfurt-based Deutsche Boerse are shifting back to expanding current operations after the European Commission blocked their merger. Deutsche Boerse agreed to buy its New York-based rival in a deal valued at $9.53 billion when it was announced in February 2011.

Deutsche Boerse is suing the EU in a move aimed at settling the issue of how regulators define the size of the region’s derivatives market. NYSE has broken with its former partner and shunned the suit.

Deutsche Boerse’s operating costs rose to 248.6 million euros in the first quarter, up from 211.8 million euros a year earlier, and included 16.6 million euros of exceptional expenses related to the failed merger. The exchange also reported 6.3 million euros of one-time costs related to its “efficiency program” and job cuts.

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.