Individual exchanges would continue operating under local supervision

Deutsche Boerse AG and NYSE Euronext have agreed on merger terms, in a deal that would see Deutsche with 60% of the combined company.

The combined group would have had net revenues of US$5.4 billion, and EBITDA of US$ 2.7 billion in 2010, making it the world’s largest exchange group by those measures.

The firms said Tuesday the combination is expected to generate annual cost savings of US$400 million, principally from information technology, clearing, and market operations, as well as from corporate administration and support functions. They also project US$133 million of annual revenue synergies through cross selling and distribution opportunities, increased turnover from liquidity pool consolidation and new products, a progressive introduction of Deutsche Boerse’s clearing capabilities and expanded scope for technology services and market data offerings.

Each of the group’s national exchanges, including those in Amsterdam, Brussels, and Lisbon, will keep its name in its local market and all exchanges will continue to operate under local regulatory frameworks and supervision.

The transaction is structured as a combination of Deutsche Boerse and NYSE Euronext under a newly created Dutch holding company, which is expected to be listed in Frankfurt, New York and Paris. Following full completion of the contemplated transactions, the former Deutsche Boerse shareholders would own 60% of the combined group and the former NYSE Euronext shareholders would own 40%.

The transaction is subject to approval by holders of a majority of the outstanding NYSE Euronext shares and to a 75% acceptance level of the exchange offer to Deutsche Boerse shareholders as well as approval by the relevant competition and financial, securities and other regulatory authorities in the U.S. and Europe, and other customary closing conditions. The transaction is expected to close at the end of 2011.

Similar to last week’s proposed merger of the London Stock Exchange and TMX Group, the group will have dual headquarters in Frankfurt and New York. It will have a 17 member board, including the chairman and the CEO. Of the 15 non-executive directors, nine will be designated by Deutsche Boerse and six by NYSE Euronext. Deutsche’s Reto Francioni will be chairman, responsible for group strategy and global relationship management. The NYSE’s Duncan Niederauer will be CEO and will lead an executive committee with an equal number of current Deutsche Boerse and NYSE Euronext executives.

Francioni, CEO of Deutsche Boerse, said, “This combination will create significant value for all stakeholders. This transaction brings together two of the most respected and successful exchange operators in the world to lead the way in global capital markets and set the standard for growth, quality and market reach.”

Niederauer, CEO of NYSE Euronext, said, “This transaction is a catalyst for the development of a global capital markets community, delivering the best, most transparent, and innovative services for clients and issuers, wherever they are. Our respective shareholders will also benefit from a significantly enhanced growth profile, the opportunity to achieve substantial cost synergies, unparalleled cash flow generation, and very strong credit metrics.”

IE