Euronext told to put Deutsche bid to shareholders

One of the biggest shareholders in Euronext accused its board yesterday of failure in its fiduciary duty to shareholders by refusing to put a merger proposal from Deutsche Börse before them.

The pan-European exchanges operator, led by its chief executive Jean-François Theodore, has agreed a €7.6bn (£5.1bn) transatlantic tie-up with the New York Stock Exchange.

But share-price fluctuations have seen the value of the cash-and-shares offer from NYSE fall below the €8.7bn proposed by Deutsche Börse.

Chris Hohn, the activist investor who runs the London-based hedge fund TCI, which owns about 10 per cent of both Euronext and Deutsche Börse, stepped up demands for a merger of the two.

He asked M. Theodore directly whether he would put Deutsche Börse's proposal to shareholders. "If the answer is yes, could you put that in writing to shareholders officially in the next two days, I would request," Mr Hohn said.

"And if the answer is no, I would like to publicly inform you that... we do at this point have a firm intention to bring the Deutsche Börse offer to shareholders through calling officially a meeting, or having it simultaneously with any NYSE vote.

"We see it as a breach of fiduciary duty of the board that a valid offer, for non-economic reasons, not be brought to shareholders." M. Theodore, who vowed to act in the best interest of Euronext shareholders when making a merger recommendation to them at a meeting in December, reiterated his commitment to the agreed deal with NYSE but insisted that any better offer would be given proper consideration.

The comments from Mr Hohn, who led the shareholder revolt against Deutsche Börse plans to buy the London Stock Exchange that ultimately cost its chief executive Werner Seifert his job, increased the pressure on the NYSE to make its own offer more generous to ensure its passage by Euronext shareholders.

Euronext, which is based in Paris, sought to ease regulatory concerns among the companies listed on its exchanges. Many are nervous that a tie-up with NYSE could see tougher US Sarbanes-Oxley rules creep into Europe.

To safeguard against this, Euronext and NYSE are proposing to set up an independent foundation with responsibility for the European side of the merged entity. The foundation would carry the theoretical power to exercise voting rights over the entire merged entity should it deem it necessary to block any future encroachment by US regulations.

Euronext and NYSE are expecting regulatory clearance for their tie-up in November. They expect the merger to be completed in the first three months of next year.

Separately, Euronext revealed that profits before tax surged 76 per cent to €263.5m over the first half of this year after a steep rise in cash and derivatives trading.