The NYSE Group Inc. and Euronext NV have agreed to a merger of equals, in a deal that will create a large global exchange.

The new firm will be named NYSE Euronext, boasting a combined market capitalisation of around 15 billion euros (US$20 billion). The firms say it will be the world’s most liquid marketplace, with average daily trading value of approximately 80 billion euros (US$100 billion), and the world’s premier listing venue, with total market cap of listed companies of 21,000 billion euros (US $27 trillion).

NYSE Euronext will be a U.S. holding company, the shares of which will be listed on the NYSE, trading in U.S. dollars, and on Euronext Paris, trading in euros. Its U.S. headquarters will be located in New York, and its international headquarters in Paris and Amsterdam (which will be the centres of operations for its international activities), with London as the centre for its derivatives business.

Under the terms of the agreement, each share of NYSE will be converted into one share of NYSE Euronext common stock. Euronext shareholders will be offered the right to exchange each of their shares for 0.980 shares of NYSE Euronext stock and 21.32 euros in cash and will be able to elect to receive all shares or all cash through a “mix and match” procedure, subject to proration. Euronext will also pay its previously announced extraordinary distribution of 3 euros per share.

The firms estimate that the deal will create pre-tax annual cost and revenue synergies of around 295 million euros (US$375 million). Approximately 195 million euros (US$250 million) in synergies will come from the rationalization of the combined group’s IT systems and platforms. Over the next three years, NYSE Euronext’s three cash trading systems and three derivatives trading systems will be migrated to a single global cash and a single global derivatives platform. In addition, 10 data centres (six in the U.S. and four in Europe) will be reduced to four globally linked data centres (two in the U.S., two in Europe), and four networks will be reduced to one.

The firms also expect their market leading position will offer opportunities to expand the combined revenue base by an estimated 80 million euros (US$100 million) over a three-year period. “NYSE Euronext will leverage the world’s most recognized exchange brands to create new products with global reach, increase its share of international listings and materially strengthen its competitive position in the U.S. equity derivatives market, the largest such market in the world,” it says.

Each of NYSE Euronext’s markets will continue to be regulated in accordance with local requirements. Specifically, NYSE Euronext’s European markets will continue to be regulated by their existing regulators, and the SEC will continue to regulate the U.S. markets.

The chairman of NYSE Euronext’s board of directors will be Jan Michiel Hessels, Euronext’s current supervisory board chairman, and Marshall Carter, the NYSE’s current chairman, will become deputy chairman. John Thain, the NYSE’s current CEO will be CEO of NYSE Euronext; and Jean-François Théodore, Euronext’s current CEO, will be deputy CEO and head of international operations of the combined company. Théodore and Thain will also join the board. The board of the combined company will be initially comprised of 20 directors, 11 directors designated by NYSE and nine by Euronext.

The NYSE Euronext exchange offer for Euronext shares is expected to be launched within six months, following the satisfaction of certain conditions, including receipt of regulatory approvals and NYSE and Euronext shareholder approval. The parties are confident that the transaction raises no competition issues.

Hessels said, “The supervisory and management boards of Euronext have been through an extensive process of identifying the best consolidation opportunity for our shareholders, issuers, and users, and we strongly believe NYSE is the best partner. This merger of equals, based on a balanced governance structure, will deliver significant shareholder value from substantial, quantified and deliverable synergies, and will allow Euronext to play a full role in reshaping the global capital market.”

“My colleagues on the NYSE Group board of directors and I are extremely pleased with the combination agreement announced today and extremely excited by the prospects of this transformational deal,” Carter added. “This transaction will produce significant synergies and outstanding value and growth opportunities, and we look forward to working toward its completion.”

@page_break@Thain said, “This is an important development in the history of the NYSE, Euronext and the global capital markets. A partnership with Euronext fulfills our shared vision of building a truly global marketplace with great breadth of product and geographic reach that will benefit all investors, issuers, and our shareholders and stakeholders.”

Citigroup Corporate and Investment Banking is acting as financial advisor to NYSE Group. In the transaction with NYSE, ABN Amro and Morgan Stanley are acting as lead advisors of Euronext. BNP Paribas and UBS Limited are acting as co-lead.