(By Balaseshan) IntercontinentalExchange Inc. (NYSE: ICE), an operator of global markets and clearing houses, said it has agreed to buy NYSE Euronext (NYSE: NYX) for about $8.2 billion in a stock-and-cash transaction.
ICE will pay NYSE Euronext $33.12 per share, representing a 37.7% premium over NYSE Euronext's previous closing share price. The overall mix of the $8.2 billion merger consideration being paid by ICE is about 67% shares and 33% cash.
NYSE Euronext shareholders will have the option to elect to receive consideration per NYSE Euronext share of $33.12 in cash, 0.2581 IntercontinentalExchange common shares or a mix of $11.27 in cash plus 0.1703 ICE common shares, subject to a maximum cash consideration of about $2.7 billion and a maximum aggregate number of ICE common shares of about 42.5 million.
[Related -Intercontinental Exchange (ICE): 3 Near-Term Catalysts For Leading Exchange]
The transaction is expected to be highly accretive to earnings in the first year after closing and produce returns on invested capital above the transaction's cost of investment beginning in year two. Earnings accretion of greater than 15% is expected in the first year post-closing.
The acquisition combines two leading exchange groups to create a premier global exchange operator diversified across markets including agricultural and energy commodities, credit derivatives, equities and equity derivatives, foreign exchange and interest rates. NYSE Euronext shareholders will own about 36% of ICE shares post-transaction.
[Related -Merger Arbitrage Mondays – June 3, 2013]
The cash portion of the transaction will be funded by a combination of cash on hand and existing ICE credit facilities. As a result of the transaction, ICE clearing will be more capital efficient and provide operational efficiencies for clearing members.
ICE is committed to preserving the NYSE Euronext brand. ICE will maintain dual headquarters in Atlanta and New York. New York headquarters will be located in the Wall Street building, home to the iconic trading floor. ICE will also open a new midtown Manhattan office in June 2013.
ICE intends to explore an initial public offering of Euronext as a Continental European-based entity following the closing of the acquisition if market conditions and European policy makers support the offering. The transaction is expected to close in the second half 2013.
The majority of run-rate expense synergies of $450 million are expected to be achieved in the second full year post-closing. ICE, upon closing of the transaction, intends to adopt a dividend policy that will provide for an annual dividend payment of about $300 million.
ICE is trading up 4.43% at $134 on Thursday, while NYX trades 36.92% higher at $32.93.