Some exchange executives turn cool on merger mania

Reuters News
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Posted: Jun 10, 2011 2:54 PM
Some exchange executives turn cool on merger mania

By Maria Aspan and Jonathan Spicer

NEW YORK (Reuters) - Executives from Hong Kong, the CME and other of the world's top exchanges downplayed the wave of mergers sweeping their industry by either casting doubts on the deals' eventual success, or by endorsing a wait-and-see approach to tie-ups.

Even Duncan Niederauer, whose NYSE Euronext is trying to seal the largest pending exchange deal, with Deutsche Boerse AG, said on Friday he thinks his company's separate bid for European clearinghouse LCH.Clearnet is unlikely to win the day.

"I think LCH is likely to stand alone," Niederauer, Chief Executive of the Big Board parent, said on the sidelines of an industry conference hosted by Sandler O'Neill. "But I thought it was an opportunity to work with the banks."

NYSE Euronext recently partnered with Markit, which is owned by banks and others, to bid for London-based LCH.Clearnet. Niederauer added that the bid for the European clearinghouse would not change the dynamics of NYSE's planned $10.2 billion deal with Deutsche Boerse.

Several other top exchange executives threw cold water on the consolidation frenzy sweeping the industry, kicked off late last year by Singapore Exchange (SGX) Ltd's failed attempt to buy Australian market operator ASX Ltd.

The dealmaking revived a wave of mergers last seen in 2006-2008, and positioned the exchanges to revamp control of capital markets in North America, Europe and Asia.

Stock exchanges in particular are under pressure in their traditional markets -- where upstart trading venues like BATS and Chi-X have eaten deep into their market shares and sharply narrowed profits -- forcing the bourses to diversify revenues and cut costs through international tie-ups.

But SGX, NASDAQ OMX Group Inc Inc and IntercontinentalExchange Inc have had their deal plans crushed by politicians or antitrust regulators, underscoring the difficulties of pulling off buyouts of such highly-regulated entities that are also sources of national pride.

The Australian government blocked the deal for ASX earlier this year, excluding SGX from the current wave of industry deals. Singapore Exchange CEO Magnus Bocker warned his competitors on Friday that size alone would not help them succeed.

"There is a danger if you think that scale is survival," Bocker told reporters. "Size will never be the single winner in this."

Earlier, he told the conference that it was a bit "sad" from Australia's perspective that the door was closed to the planned cross-border tie-up.

Other executives whose exchanges are sitting on the sidelines also defended their positions and expressed doubts that much of the industry would succeed in partnering up.

A top executive from Hong Kong Exchanges and Clearing Ltd, the world's largest exchange operator by market capitalization, said it has no "grand plans" for mergers just now.

Even the CEO of Tokyo Stock Exchange Group Inc, which has been eyeing a deal with Japanese peer Osaka Securities Exchange, said "everything is in the air."

Craig Donohue, CEO of giant Chicago-based derivatives trader CME Group Inc, told the conference: "You're seeing some of these deals are difficult to complete.

"When you get beyond intra-North American or intra-Europe, or maybe even transatlantic between Western Europe and North America, I think these deals become more difficult on many different levels. Certainly on the national, political and regulatory level," Donohue said.

London Stock Exchange Group Plc, which offered to buy the Toronto Stock Exchange parent TMX Group Inc for about $3.5 billion back in February, now faces a counter-offer from a consortium of Canadian banks and pension funds known as Maple Group.

Yet Tom Kloet, TMX's chief, said the company is in "quite good shape" to get key approvals in Canada, and he and LSE chief Xavier Rolet together expressed confidence shareholders would approve their deal at a June 30 vote.

All of the executives were in New York for a two-day exchanges conference hosted by investment bank Sandler O'Neill.

(Reporting by Maria Aspan and Jonathan Spicer, editing by Gerald E. McCormick)