Source: The Associated Press

Stock market operator NYSE Euronext said Wednesday that it is in “advanced discussions” about a possible merger with Germany’s Deutsche Boerse AG, which runs the Frankfurt stock exchange.

A possible all-stock deal would create the world’s largest exchange operator by revenues and profit, NYSE Euronext said. The new entity would have headquarters in New York and Frankfurt — with NYSE Euronext effectively downgrading one of its present headquarters, Paris.

NYSE Euronext’s statement came on the heels of the announcement earlier Wednesday of a merger between two other rival exchanges — the London Stock Exchange Group PLC and TMX Group Inc., which operates the Toronto Stock Exchange.

In New York, investors cheered the announcement in midday trading, sending NYSE Euronext’s shares up by 15% to US$38.54.

The company cautioned, however, that no agreement has been reached and there could not be any assurance that a deal would eventually be done.

Deutsche Boerse AG chief executive Reto Francioni would become the new group’s chairman, and NYSE’s CEO Duncan Niederauer, based in New York, its CEO, Wednesday’s statement said.

The new company’s executive committee would be drawn equally from the current leadership of both companies, it added.

Deutsche Boerse AG confirmed the merger talks and said it expects the deal to create synergies worth 300 million euros (US$410 million), drawn from savings on IT infrastructure and clearing services among others.

NYSE Euronext operates the New York Stock Exchange and markets in Amsterdam, Brussels, Lisbon and Paris as well as the NYSE Liffe derivatives market.

Deutsche Boerse AG, whose predecessor was founded in 1585, operates the stock market in Europe’s biggest economy and also a major derivatives exchange platform, Eurex which it says is the world market leader in trading and clearing futures and options together with its subsidiary ISE.

NYSE Euronext said it expected the two market operators to combine their businesses under a new legal entity incorporated in the Netherlands. Deutsche Boerse shareholders would hold some 59 to 60% of the combined equity, and NYSE Euronext shareholders holding the remainder.

For Deutsche Boerse, the deal would represent a breakthrough in its aim to strengthen its international profile.

Three years ago, Deutsche Boerse had been in merger talks with NYSE Euronext, but no deal resulted.

In 2006, the company tried to buy Euronext NV in a bid to build a pan-European stock exchange, but it eventually gave up, clearing the way for NYSE to merge with Euronext, which then formed the world’s first trans-Atlantic stock exchange.

In 2005, a Deutsche Boerse takeover bid for Britain’s London Stock Exchange Group PLC did not succeed.

Trading in the shares of both companies’ home markets was halted late Wednesday.

NYSE Euronext shares last traded in Paris at 27 euros (US$36.81), up 12%, while Deutsche Boerse’s last quoted share price in Frankfurt was 58.42 euros, up 1.7%.