A little-known but fast-growing Atlanta financial company is part of an $11.3 billion buyout bid that could reshape the arcane world of global trading exchanges.
IntercontinentalExchange Inc., often called by its stock symbol ICE, on Friday teamed with the NASDAQ exchange in a hostile bid for the company that owns the venerable New York Stock Exchange.
ICE runs trading platforms for futures contracts and other types of derivatives. The 11-year-old company might not be a household name, but the business done over its array of exchanges affects such things as the prices of groceries and gasoline.
Under the proposal, NASDAQ’s parent company would acquire NYSE Euronext’s iconic Wall Street trading floor and its stock exchanges in Europe.
ICE would take control of NYSE Euronext’s derivatives operations. It isn’t clear if the deal would add much to ICE’s 316-person workforce in Atlanta, but it would continue the company’s rapid climb to prominence in the exchange industry and add to the financial prestige that goes with it.
The proposed deal faces many hurdles, however.
Another suitor, Deutsche Boerse, already has a nearly $10 billion offer on the table for NYSE Euronext and is considered likely to counter the NASDAQ-ICE proposal. The deal would also require approval by shareholders, and likely regulators in both Europe and the U.S.
Still, the NASDAQ-ICE move was the talk of Wall Street on Friday.
“Acquiring a blue chip franchise like this is a tremendous change of ownership and market prestige,” said Andy Nybo, head of derivatives at TABB Group in New York City. He said the deal would “catapult” ICE’s standing in the market.
ICE is no stranger to buyout offers that grab financial headlines, and it has made several successful buys. They include a 2007 deal to buy the New York Board of Trade.
ICE also made a blockbuster $11 billion bid that year to buy the Chicago Board of Trade, losing out to the Chicago Mercantile Exchange.
Jeffrey Sprecher, ICE’s chairman and CEO, told reporters the deal will increase competition in derivatives trading in Europe and the U.S. The companies said their bid also makes the New York stock market stronger by marrying the two leading U.S. exchanges.
As part of the ldeal, ICE would control NYSE Euronext’s Liffe unit in Europe and Liffe US. The European arm trades in interest rate futures, among other things.
Liffe U.S. would give ICE expanded trading in futures of products such as metals, making it a stronger rival to the Chicago Mercantile Exchange, which beat out ICE to buy the Chicago Board of Trade.
ICE roared passed $1 billion in annual revenue last year. It makes money each time trades are made on its exchanges. Atlanta employment has tended to grow each time ICE makes an acquisition.
Paul Zubulake, senior analyst with Boston-based Aite Group, said ICE likely will keep the European operations it would gain in the buyout across the Atlantic..
“I think from a job perspective it isn’t a boom for Atlanta, but it isn’t a bust either,” he said.
New York, however, would likely see substantial job costs and other cost reductions should NASDAQ and the NYSE combine, Zubulake said. ICE and NASDAQ expect ultimate cost savings of $740 million over three years.
Other merger activity in the stock exchange business has put pressure on NASDAQ to jump in, said Tim Sweeney, founder of FinTech Partners in Atlanta.
ICE provided a partner to help put together a richer bid.
“It’s been rumored for awhile. They stepped up and it’s a serious bid,” said Sweeney. He called it “a game-changer.”
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, said Erika Olson, author of “Zero Sum Game,” a book about ICE’s failed bid for the Chicago Board of Trade.
Derivatives made up of bundled mortgage securities helped tank the economy in 2008, but derivatives are commonly and safely used in other industries.
“ICE doesn’t control the market, but it creates an open market for extremely influential world wide products that affect all of us,” said Olson.
She said many people probably know about futures from the Eddie Murphy comedy film Trading Places, in which two aging New York tycoons try to corner the market on frozen concentrated orange juice on the New York Board of Trade -- now owned by ICE.
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