By Harro ten Wolde and Jonathan Spicer
FRANKFURT/NEW YORK (Reuters) - Deutsche Boerse will take over NYSE Euronext to create the world's largest exchange operator in a deal worth $10.2 billion, but the two exchanges dodged key questions that could yet threaten its completion.
While shareholders of the German exchange will control 60 pct of the new company and 10 of 17 board seats there are suspicions in Germany over whether NYSE management will be in the driver's seat. There are also concerns in the U.S. that the New York Stock Exchange will lose influence and any sense of independence.
That tension could raise obstacles to final regulatory approval to Deutsche Boerse's planned takeover, which values the two century old icon of American capitalism at about $39 a share.
No name has yet been given to the combined group and NYSE Euronext Chief Executive Duncan Niederauer, who will have the same title at the combined group, said that talks were still ongoing in a bid to find a name that would address political concerns on both sides of the Atlantic.
Reto Francioni of Deutsche Boerse, who will become chairman, insisted at a news conference that the deal, which he said "reshapes our entire industry," would strengthen the roles of both New York as the financial capital of the world and of Frankfurt as the European financial capital.
Still, U.S. Senator Charles Schumer, who first raised the name issue over the weekend, has been insisting that NYSE should come first in the name of the group, which will have headquarters in both New York and Frankfurt.
The combined entity will have more than $20 trillion in annual trading volume and operations in Germany, France, Britain, Amsterdam, Portugal, Belgium, and the United States.
Under the terms of the deal NYSE Euronext stock will be exchanged for 0.47 shares in the new company, while Deutsche Boerse shares will be swapped on a one-for-one basis, the exchanges said in a statement.
At a 60-40 ownership split, the 55 percent of shareholders in a combined company would be from the United States, with 11 percent from Germany, 11 percent from the UK and 23 percent from the rest of the world, a source familiar with the deal said.
The exchanges face intense competition in their traditional stock-trading business from younger trading venues geared toward today's increasingly dominant high-speed electronic traders.
NYSE -- first created by brokers and merchants who met under a buttonwood tree in lower Manhattan -- is one of several exchanges that have responded by investing in technology and moving into more profitable derivatives trading.
Together, Deutsche Boerse's Eurex unit and NYSE Euronext's London-based Liffe unit would dominate European exchange-based futures trading, with more than 90 percent overall, raising antitrust questions among market regulators.
CONSOLIDATION WAVE
After a few years' hiatus that included the financial crisis and the beginning of a global regulatory revamp, the world's exchange operators are back in the takeover game.
Singapore Exchange bid for Australia's ASX late last year. And last week, London Stock Exchange said it would buy Toronto Stock Exchange operator TMX Group, just hours before Deutsche Boerse and NYSE Euronext said they were in advanced talks.
Local concerns over the wave of consolidation sweeping the industry surfaced in Asia on Tuesday as Singapore Exchange tweaked its $7.9 billion bid for ASX to allow more Australian directors onto a combined board in an attempt to win over sceptical Australian politicians.
Nationalism has long been one of the biggest hurdles to exchange mergers. The marketplaces are often symbols of national pride and important to attracting business and capital.
Regulators are paying close attention to the deals, and exchange users have also raised red flags for fear the takeovers will limit competition.
"Euronext and Deutsche Boerse are still screwing us on fees for clearing, the closing auctions and small and mid-cap trading -- the areas where they still have virtual monopolies," said the head of markets at a large European bank, who declined to be named. "A merger is concerning because together they will be more powerful and better placed to protect these monopolies."
The LSE deal with TMX has already run into foreign ownership concerns in Canada.
But despite rumblings about Middle Eastern ownership in Ontario, LSE shareholder Borse Dubai, which is owned by the ruler of the Gulf Arab emirate, has not been asked to trim its 20 percent stake, a source familiar with the matter said.
Singapore Exchange's willingness to give ground and award an equal number of board seats to Australians and Singaporeans in the combined entity shows how local sensibilities are being overcome as the pressure to consolidate rises. The value of SGX's offer has not been changed under the new proposal.
(Additional reporting by Philipp Halstrick, Ed Taylor, Paritosh Bansal, Adrian Bathgate, Saeed Azhar, Luke Jeffs and Narayanan Somasundaram; Writing by Alexander Smith and Christian Plumb; Editing by Jane Merriman, Chris Wickham, Martin Howell)
