Hostile bid in sight as Nasdaq targets rival New York exchange

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Nasdaq OMX has turned hostile in its bid for NYSE Euronext, after the rival exchange group repeatedly refused to open talks on its $11bn takeover offer.

The direct appeal to NYSE shareholders is Nasdaq's newest effort to prise the NYSE board from its commitment to an alternative deal to sell the company to Deutsche Börse.

The battle for control of NYSE, parent company of the iconic New York Stock Exchange and the Liffe derivatives market in Europe, has become increasingly bitter, as Nasdaq accused NYSE of flouting the very corporate governance rules it imposes on companies listed on its exchange.

Bob Greifeld, chief executive of Nasdaq, attacked the NYSE board for refusing to talk to him about his alternative proposal, which is worth more than the deal on the table from Deutsche Börse. Nasdaq has teamed up with IntercontinentalExchange, a fast-growing derivatives exchange, to make a joint bid for NYSE, and the two companies will carve up the NYSE business between them if they are successful. NYSE shareholders would get $3.7bn in cash, plus Nasdaq and ICE shares, making the total value of the deal $11.1bn at yesterday's share prices.

Nasdaq and ICE last night launched an exchange offer for NYSE shares, in which NYSE investors register their intent to accept their bid – a move that would bypass the NYSE board. Nasdaq and ICE will actually buy the tendered shares and activate their takeover if the number of acceptances passes 51 per cent of NYSE shareholders.

"The NYSE board has continually challenged the seriousness of our proposal and refused to engage us in discussion despite the positive feedback we have received from their stockholders," Mr Greifeld said. "The commencement of this exchange offer should convince the board of the seriousness of our intentions."

At NYSE's annual shareholder meeting last week, investors called for the opening of talks with Nasdaq, in the hopes of generating a bidding war. Under the terms of the all-share merger with Deutsche Börse, NYSE shareholders will own a little over 40 per cent of the combined group, terms that valued NYSE at $10.3bn as of yesterday.

When Nasdaq launched its counter-bid for NYSE last month, it was pitched at a 21 per cent premium to the Deutsche proposal, but that enticement has eroded. Because of the falling dollar and a rise in the Deutsche Börse share price, Nasdaq's proposal is now worth less than 8 per cent more.