Atlanta-based IntercontinentalExchange, little known by the public but a rock star in the financial world, said Thursday it will acquire the parent company of the New York Stock Exchange in an $8.2 billion deal.
The combined company will have dual headquarters in Atlanta and New York City. The New York Stock Exchange will stay on Wall Street.
The deal shines a spotlight on Atlanta as a new hub in the financial world and makes ICE a stronger competitor against other global exchanges, industry analysts said.
Twelve-year-old IntercontinentalExchange, often simply known by its stock sticker ICE, will acquire NYSE Euronext’s operations, including the 220-year-old New York exchange also known as the Big Board, the great-granddaddy of U.S. capitalism.
The NYSE holds the stock listing of some of the best known companies in the world, including metro Atlanta giants Coca-Cola, UPS, Home Depot and Delta Air Lines. Beyond stocks, it also operates a massive futures market for financial vehicles related to interest rates, which ICE has coveted.
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Though the New York exchange remains a venerable symbol, its influence has waned as trading of stocks and other investments has moved to other digital platforms. NYSE’s revenue from traditional trading of stocks has declined, and the company has sought merger partners and ways to make itself more efficient in recent years.
Still, Jeff Sprecher, ICE chairman and chief executive, called the deal “transformative.”
“We are a growth company in our DNA,” Sprecher told analysts when asked why ICE bought the exchange. “We are owned by investors that want growth and we’re not interested in slow-growth or no-growth and low-margin businesses.”
ICE operates trading platforms, but unlike the NYSE it does not trade corporate stocks. Much of the trading done over its networks is of contracts for crude oil, sugar, and other commodities, which affects the price of things such as gasoline and groceries.
ICE was founded in Atlanta in 2000 as an electronic exchange to trade energy futures. It employs about 1,100 people worldwide, including about 380 in metro Atlanta.
ICE reported $1.33 billion in revenue in 2011, and $1.04 billion through the first nine months of this year. The company earns much of its money from the volume of trading on its array of exchanges.
Asked about the merger’s impact on operations in Atlanta, Kelly Loeffler, a spokeswoman for ICE, did not divulge any specific plans.
“We’ll continue to grow in Atlanta, there’s no question about that,” she said.
The combination of ICE and NYSE needs U.S. and European regulatory approval, and is expected to close in the second half of 2013. The deal, a mix of ICE stock and cash, is valued at $33.12 per NYSE Euronext share.
Sprecher will remain the chairman and CEO of ICE, while NYSE Euronext CEO Duncan Niederauer, an Emory University alumnus, will be president of the combined company and run the NYSE.
Where the New York Stock Exchange has played a key role in the economy for more than two centuries, IntercontinentalExchange is an upstart occupying a modest office just north of I-285.
But ICE is no stranger to headline-grabbing buyout bids. In April 2011, ICE joined the parent of the NASDAQ exchange in an $11 billion hostile-takeover bid for NYSE Euronext, which was in merger talks with German rival Deutsche Boerse.
ICE and NASDAQ pulled their bid as U.S. regulators balked because of concerns that the combined entities would corner the market on stock listings. The proposed merger of NYSE Euronext and Deutsche Boerse also fell through because of antitrust concerns.
In 2007, ICE acquired the New York Board of Trade and got into an ultimately unsuccessful bidding war with its rival, the Chicago Mercantile Exchange, for the Chicago Board of Trade.
This latest deal should pass regulatory scrutiny because there are fewer concerns about the companies cornering a specific market or the nationalistic concerns that have scuttled other cross-border mergers between major exchanges, said Will Rhode, TABB Group principal and director of fixed-income research.
Erika Olsen, who wrote a book about Sprecher and ICE’s failed 2007 attempt to buy the Chicago Board of Trade, said the NYSE deal “catapults them into the mainstream financial services limelight.”
Though the purchase of the venerable New York Stock Exchange is likely to capture the most public interest, the deal is most lucrative for operations in a vital part of the economy the average investor may not understand as well.
ICE also is acquiring NYSE Euronext’s Liffe unit in Europe and Liffe U.S.
The European arm trades in interest-rate futures, among other things.
Businesses use futures and other derivatives to hedge against adverse commodity or financial-market movements, to lessen the impact of swings in prices of products such as oil or swings in interest rates. That stabilizes prices for consumers, too.
Derivatives made up of bundled mortgage securities helped tank the economy in 2008, but derivatives are commonly and safely used in other sectors.
Liffe U.S. would give ICE expanded trading in futures in a broader swath of products, making it a stronger rival to CME Group, parent of the Chicago Mercantile Exchange, the second-largest exchange operator in the world.
The ICE-NYSE tie-up could re-stimulate consolidation among trading exchanges, which died out last year after NYSE could not consummate a deal, Rhode said.
The merger activity is largely influenced by the emergence of new competitors and changes in financial regulation since the Great Recession, Rhode said.
After completing the deal, ICE said it will “explore” spinning off Euronext and its five European stock exchanges into a separate, publicly traded company.