With its future in doubt, NYSE Euronext issued its own sell order, writes Michael de la Merced.
When the chief executive of IntercontinentalExchange approached his counterpart at NYSE Euronext about a merger in September, they quickly came to terms, hashing out a deal in only three months.
The union just made sense.
NYSE Euronext, the owner of the New York Stock Exchange and facing a slowdown in its core equities trading business, was mulling its options after a deal with the German exchange fell apart last year.
IntercontinentalExchange, an upstart in the high-growth derivatives market, had long sought an international platform and a way to expand its footprint in futures trading, having lost a bidding war for a London exchange.
They both got what they wanted.
On Thursday, IntercontinentalExchange, or ICE, said that it would pay $US8.2 billion ($7.8 billion) for NYSE Euronext, creating a trans-Atlantic giant in stocks, derivatives and commodities trading.
The deal revives a stalled push for consolidation among market operators at a time when bigger is not only better but necessary.
"It's good that we kept the door open," said Duncan Niederauer, NYSE Euronext's chief.
"We always thought that this was a good partnership."
NYSE Euronext has eyed a deal with its younger rival for a while.
In talks with his board three years ago, Mr Niederauer noted that ICE would complement its core businesses and help the company gain scale. He contended that marrying his slow-growing stock trading business with ICE's enormously profitable commodities markets would rejuvenate NYSE Euronext.
It would also benefit the crown jewel of NYSE's portfolio, Liffe, a London-based futures exchange. By teaming with ICE, the company would add a much-needed platform to settle customer trades. In essence, NYSE would have a one-stop shop for trading and clearing futures.
The merger also seemed unlikely to invoke the ire of antitrust regulators, unlike a deal with a top rival in equities such as the Nasdaq OMX Group. NYSE Euronext and ICE have little overlap in their key businesses.
Last year, NYSE Euronext tried to strike a deal with the German exchange, hoping to create one of the world's biggest derivatives exchanges. The threat of that was enough to drive ICE's chief executive, Jeffrey Sprecher, to partner with Nasdaq on a hostile $US11 billion bid for NYSE Euronext.
During that time, Mr Sprecher - by his own reckoning - criticised the parent of the New York Stock Exchange in as many ways as he could. NYSE Euronext's board, he said, was "the only obstacle" preventing shareholders from getting a good deal. But the ICE chief said he had refrained from personal attacks, given his long and friendly relations with Mr Niederauer.
When the US Justice Department blocked the hostile bid on antitrust grounds, Mr Sprecher wondered whether he had severed their friendship. But several weeks later, after one of ICE's quarterly earnings presentations with analysts, he received a quick email from Niederauer. It simply read: Good call.
"It was a magnanimous gesture," Mr Sprecher said.
Soon NYSE Euronext found itself in a bind. European regulators squashed the deal with the German exchange in February, leaving NYSE scrambling to find another solution to its growth problems.
NYSE Euronext had lost a year in creating a clearing platform for Liffe, putting those efforts aside as it focused on the German merger. And investors continued to lose faith in the company. At a market value of $US5.6 billion in June, NYSE Euronext seemed to have little of value but its London unit.
The board considered multiple options, including buying and selling assets. NYSE Euronext joined the bidding for the London Metal Exchange but dropped out of the race early as the potential price rose.
ICE also took a run at the London market, ultimately losing to the Hong Kong Exchange's $US2.1 billion bid.
NYSE and ICE went back to the drawing board. In late September, Mr Sprecher approached Mr Niederauer, and the two companies found themselves in alignment on several issues.
Mr Sprecher said he was willing to maintain two headquarters, ICE's home in Atlanta and the Big Board's centre in New York. He hoped the move would help allay concerns from people like Senator Charles Schumer of New York, who had warned that the NYSE name had to come first in the deal for the German exchange.
The two sides struck a separate agreement in which Liffe would use ICE's clearing services by June, even if the merger fell apart.
During their talks, Mr Niederauer showed little hesitation in the revamped structure. When the deal closes, he will be ICE's president and will report to Mr Sprecher.
With NYSE's board having discussed the transaction last week and on Monday, the two men flew to Europe to make their presentation. They returned to New York City after midnight on Thursday to unveil the deal - one that ultimately reflected the diminished position of the once powerhouse market.
"Let me be clear that this combination - while friendly and strategic - is an acquisition, not a merger of equals," Mr Niederauer wrote in a memo to NYSE employees. "We've built a stronger company, with a great brand and a bright future."