NYSE Euronext And ICE Clear One Regulatory Hurdle In Pending Merger

by Trefis Team
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IntercontinentalExchange (NYSE: ICE) and NYSE Euronext (NYSE: NYX) announced this week that the waiting period regarding the proposed merger of the two companies under the Hart-Scott-Rodino Act (HSR act) expired Friday, February 15.

The expiry of Hart-Scott-Rodino Act waiting period without any red flags is a positive event for the merger and indicates that the U.S. regulatory authorities might not have any major concerns about the deal. Assuming no resistance from European regulators, we could assume that NYSE and ICE are now free to proceed with their integration efforts and try to close the deal. In our opinion, this is a positive event for NYSE-Euronext deal.

What Is The Hart-Scott-Rodino Act About?

The act provides the U.S. Federal Trade Commission and Department of Justice time (usually 30 days) to determine if an acquisition is likely to give the merging entities disproportionate advantage, thereby affecting commercial activity in the U.S negatively. During this time, the merging entities are prohibited from the completion of M&A or sale of securities, including executive compensation grants.

Usually, if these agencies determine during this waiting period that further enquiry is necessary, they can extend the waiting period (usually by another 30 days) by requesting the merging parties for additional information. [1]

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While antitrust concerns continue to be a concern for this particular merger, we believe that there is limited overlap among the businesses of ICE and NYSE Euronext. This merger is hence more likely to pass regulatory review from authorities on either side of the Atlantic.

However, we must reiterate that regulatory concerns could still prop up at a later date. We have yet to hear anything from European authorities, which have been against any exchange deals impacting the structure of capital markets, especially European derivative markets in Europe in a significant way.

European authorities could take up to the maximum time limit of 105 working days from the date of initiation of regulatory proceeding to come out with a clear say on the deal. [2] As the proceedings began near the end of December 2012, this means it may be a wait-and-watch game for investors who are betting on the success of the merger. Also, there may still be some regulatory hurdles for the deal in the U.S.

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Notes:
  1. Hart-Scott-Rodino Premerger notification Program, FTC []
  2. Rules Applicable to Merger Control, EU Competition Law []
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