(Updating with more details on value of offer, anti-trust issues, background)
FRANKFURT (AFX) - Deutsche Boerse AG has modified the structural part of its merger proposal for Euronext NV, but has left the financial terms unchanged, according to a statement from the German exchange operator.
'The modified proposal underscores Deutsche Boerse's concept of a federal model with a division of power between the financial centers involved,' Deutsche Boerse said.
'Against the background of this modified proposal and its financial attractiveness in the light of the recent share price developments, Deutsche Boerse expects the Euronext Board to reassess the situation,' it added.
The exchange operator also said that it still believes a merger with Euronext will create superior value for shareholders and all other stakeholders, as well as an industry leader in a deal that will significantly contribute to the further integration of European financial markets.
As part of its new offer, Deutsche Boerse has proposed to integrate the IT divisions of both groups into a joint venture with France's Atos Origin, subject to an agreement with Atos.
The IT activities of the combined group would then operate as a service provider to the business divisions of both the Frankfurt and Paris hubs. Previously, Deutsche Boerse had proposed that they should be based in Frankfurt.
Deutsche Boerse reiterated that cash equities trading would be based in Paris, Information Services operated from Amsterdam and derivatives from Frankfurt and Paris.
Leadership for group functions would be split between Frankfurt, Amsterdam and Paris -- Deutsche Boerse having originally proposed to make Frankfurt the headquarters of the combined group.
Deutsche Boerse also proposed to streamline the trading structure of the new group, by adopting Euronext's NSC trading system as the combined cash equity trading platform and Deutsche Boerse and Swiss Exchange SWX's 50-50 joint venture Eurex as the combined derivatives trading platform.
In terms of management, Deutsche Boerse said it still sees the supervisory and management boards being made up of an equal number of representatives from both companies, though it will fill the CEO position of the merged group, while Euronext would get to fill the supervisory board chairman position.
Commenting on the value of its offer, Deutsche Boerse said under the terms originally proposed, each Euronext share is now valued at 65.98 eur, compared with 65.67 eur under the rival NYSE offer, based on the share prices on June 16.
'In addition, the Deutsche Boerse proposal -- in contrast to the NYSE proposal -- offers Euronext shareholders a significantly higher share in the combined group than the net income contributions of the two companies would suggest,' it added.
Based on prospective full-year 2006 net income contributions derived from broker consensus estimates, Euronext would contribute 36 pct to the net income of the new holding company, whereas the share in the new company for Euronext shareholders -- based on the volume-weighted three-months' share price averages as of June 16 -- would be 42 pct, it said.
When outlining its initial offer, Deutsche Boerse said it proposes to form a legal entity, referred to a 'NewCo'. Shareholders would be asked to tender their shares in exchange for a combination of NewCo shares and cash.
According to Deutsche Boerse's calculation at the time, Euronext shareholders will receive 0.68 NewCo shares along with 7.72 eur in cash for each Euronext share they exchange.
Deutsche Boerse shareholders will receive 1.0 NewCo share along with 11.38 eur for every Deutsche Boerse share they exchange.
In regard to anti-trust issues, Deutsche Boerse said that it does not believe its proposal entails any significant execution risk.
'Deutsche Boerse has initiated the pre-notification process to obtain antitrust clearance from the European Commission (and) is prepared to make far-reaching proposals with regards to cash equities clearing in order to satisfy antitrust concerns,' it said.
'Discussions with the Commission have been held in a constructive atmosphere,' it added. niklas.magnusson@afxnews.com nm/vs COPYRIGHT Copyright AFX News Limited 2005. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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