U.S.-based the Nasdaq Stock Market Inc. and Sweden’s OMX AB have agreed to merge to create a large, transatlantic exchange rival for NYSE Euronext Inc.
The boards of directors of Nasdaq and OMX have entered into an agreement to combine the two companies in a deal that they say will create the world’s premier exchange and technology company. “The combination will create the largest global network of exchanges and exchange customers linked by technology,” they say.
The new group, to be called the Nasdaq OMX Group, will be created through a cash and stock tender offer by Nasdaq for all outstanding shares in OMX. The consideration offered is equivalent to 0.502 new Nasdaq shares plus 94.3 Swedish kronas in cash for each OMX share. Based on Nasdaq’s closing price on May 23, the offer values OMX at US$3.7 billion, and represents a premium of 19% to its closing price on May 23, the last full trading day prior to the announcement, and a premium of 25% to the volume weighted average price per OMX share over the prior 20 trading days.
The combined group will have 2,349 employees in 22 countries with pro forma revenue for the financial year 2006 of more than $1.2 billion. The pro forma market capitalization of the Nasdaq OMX Group will be approximately US$7.1 billion, of which Nasdaq shareholders will own approximately 72% and OMX shareholders will hold approximately 28%.
The firm will be governed by representatives from both Nasdaq and OMX under the leadership of Robert Greifeld, CEO of Nasdaq, who will serve as CEO and Magnus Bocker, CEO of OMX, who will serve as president. The board of directors will consist of 15 members, including nine representatives from Nasdaq, five representatives from OMX and the CEO. The Nasdaq OMX share will be listed on Nasdaq and on OMX Nordic Exchange.
The deal is unanimously recommended by the boards of directors of each OMX and Nasdaq. Investor AB, Nordea Bank AB and Bocker, together representing approximately 16.6% of OMX’s current issued ordinary share capital, have entered into irrevocable undertakings to accept the offer. In addition, Hellman & Friedman, Silver Lake Partners, and Greifeld have each agreed to vote their shares in favor of the deal.
Together, the Nasdaq and OMX exchanges will process an average daily volume of 7.4 million trades, representing a value of approximately $61 billion. The exchanges will have approximately 4,000 companies listed from 39 countries with an aggregate market capitalization of approximately $5.5 trillion. OMX Nordic Exchange is also Europe’s third largest marketplace for trading and clearing equity-related derivatives. The firms also say that the combined entity will be well positioned to drive organic growth and to continue to take a proactive role in sector consolidation, in Europe, emerging markets, the Americas and Asia.
The firms also forecast total pre-tax annual synergies estimated at $150 million, comprised of $100 million in estimated cost synergies and $50 million in estimated revenue synergies. Cost synergies will be realized through the rationalization of IT systems and data centres, rationalization of non-IT functions, and reduced capital and procurement expenditure. Revenue synergies will be achieved through the creation of deeper liquidity pools, increased cross-border trading, increased international listings, packaged data products and enhanced technology sales.
“The future of exchanges is about technology, flexibility and scale. Nasdaq and OMX together deliver all of these benefits,” said Greifeld. “Our technology leadership and track record in linking trading platforms means we will offer issuers and investors unique benefits which were not available in one company until now. This combination provides our organizations with the ability to grow and accelerate the global flow of equity capital. At the same time, it provides us with an excellent platform for further expansion into derivatives and other asset classes. Our organizations bring together very complementary businesses, and we see many new opportunities for growth in an era of unprecedented change and development for exchanges.”
“This combination creates a new leader in the exchange industry,” added Bocker. “By utilizing the combined entities’ joint expertise and competencies we will create an outstanding platform for future growth. Issuers, members, information vendors and investors on both Nasdaq and OMX Nordic Exchange will all benefit from its new global context. The combination also provides benefits for OMX’s global technology customer base, as it enables an increased focus on research and product development in the most important and fastest growing areas of the exchange technology market.”
Nasdaq, Sweden’s OMX to merge
The new entity will create a transatlantic rival to NYSE Euronext
- By: James Bagnall
- May 25, 2007 May 25, 2007
- 08:59