By Jonathan Spicer
BOCA RATON, Fla (Reuters) - Nasdaq OMX Group Inc's
Nasdaq is moving closer to making a bid to trump Deutsche Boerse's more than $9 billion deal for NYSE Euronext, but it must first find $5 billion of debt financing.
Any rival offer would also have to account for a relatively steep 250 million euro ($347.5 million) termination fee on the NYSE-D.Boerse deal.
The exchange would also need to team up with the IntercontinentalExchange Inc,
On Tuesday morning at an industry conference in southern Florida, the news of a possible Nasdaq deal was center stage, as executives and regulators tried to parse out what motivates ICE CEO Jeffrey Sprecher and Nasdaq CEO Robert Greifeld.
"These guys are deal guys. But the odds of this succeeding are really low," said Joe Gawronski, president at Rosenblatt Securities, an agency broker that does a lot of research on market structure.
"Hostiles are particularly tough in the exchange industry," he said.
Nasdaq could make a rival offer this week, although the situation is still in flux, according to the source.
Even friendly mergers have proven difficult to pull off in an industry in which exchanges are proud national symbols, and when politicians and regulators can block them.
"There is an outside risk, or concern, that our capital markets are controlled by non-U.S. companies. It's a small concern, but it's out there," said Gerry Corcoran, CEO of Chicago broker RJO Futures.
In the end, "it will be an economic, rather than an emotional, decision," he said.
On the sidelines of the conference, hosted by the Futures Industry Association, Sprecher declined to comment on any possible counter-offer.
RATTLED DEBT MARKETS
Getting the debt markets to play along could be difficult. Last week's massive earthquake and tsunami in Japan has made some lenders wary. Toys R Us this week canceled a planned loan refinancing because of market conditions, market sources said.
Still, ICE and Nasdaq both have real motivation to make a deal work.
A successful counter-bid would give ICE, an Atlanta-based futures specialist, a profitable gem in NYSE Euronext's London-based Liffe platform, which is strong in interest rate securities.
ICE's Sprecher launched his bid for derivatives exchange Chicago Board of Trade at this conference exactly four years ago, but later lost out to rival CME Group Inc
Greifeld, too, has in the past failed in a hostile bid for London Stock Exchange Group
"The power of a combined Deutsche Boerse-NYSE Euronext creates a really strong entity, and I think it leaves Nasdaq significantly behind," said Larry Tabb, CEO of research and consulting group TABB Group. "What you're seeing is Greifeld is looking to entertain some strategy options."
"ICE's currency is rich and they have less debt on their books, so they've got to be an integral part of this deal," said Tabb, adding ICE and Nasdaq could simply be aiming to launch a bidding war that could damage their fierce rivals.
STOCK TRADING POWERHOUSE
Bringing Nasdaq and the New York Stock Exchange parents together, meanwhile, would create a stock-trading powerhouse in the United States and Europe that would also dominate the business of listing U.S. public companies, and dwarf other U.S. options markets.
But at the conference, some wondered why Nasdaq would make a move that entrenches it deeper into the low-margin stock-trading business that has prompted rivals to diversify in to derivatives.
Sweeping reforms, meanwhile, are pushing much of the world's vast over-the-counter derivatives market onto exchanges and similar venues -- a big opportunity for derivatives exchanges, and another reason cited for the Deutsche Boerse-NYSE Euronext combination.
"If Nasdaq goes ahead with its plans to buy NYSE, they would have to give up aspirations to be a player in OTC because their credit rating would come under pressure," said Diego Perfumo, an exchanges analyst at Equity Research Desk.
Nasdaq's shares were off 2.3 percent at $25.74, while NYSE was off 2.2 percent at $35.74 and ICE was off 0.9 percent at $123.70 during afternoon trading.
(Reporting by Jonathan Spicer, additional reporting by Ann Saphir and Roberta Rampton in Boca Raton and Paritosh Bansal in New York; Editing by Derek Caney, Bernard Orr)
