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NYSE-Euronext merger 'a blow against French protectionism'

The long-awaited $20bn (£11bn) merger of equals between Euronext and the New York Stock Exchange, to form the world's first transatlantic stock exchange, might break down barriers between corporate Europe and America, the head of the NYSE said yesterday.

John Thain said: "This can further enhance relations between the US and Europe." The deal, in overcoming protectionist tendencies on both sides of the Atlantic," he added, "set a precedent for creating a global competitor and was an important step for 'true global trade and true globalisation'."

France has long resisted foreign takeover bids, with the government vowing to defend the food group Danone against a possible hostile bid from America's Pepsi. Euronext has been more anxious to fend off advances from its Frankfurt rival Deutsche Börse. Under yesterday's deal, the NYSE will buy Euronext for about €7.8bn (£5.4bn). While the senior roles within the new NYSE Euronext are carefully balanced, NYSE shareholders will have a majority of the capital of the combined company. It will be based in New York, while London will be home to the derivatives business.

Several Euronext shareholders have voiced concerns about the dilution of their holdings. The London hedge fund TCI has favoured a tie-up with Deutsche Börse, but the US hedge fund Atticus, a big investor in Euronext and the NYSE, now backs the merger. Euronext said it may welcome the Italian stock exchange into its fold before it completes the merger with the NYSE. Talks with Borsa Italiana are due to begin next week. Euronext runs stock exchanges in Paris, Amsterdam, Brussels and Lisbon and the Liffe derivatives market in London.

If a deal is struck before Euronext's merger with the NYSE is complete, Borsa Italiana will get a seat on the board of the combined company.

While talks with Deutsche Börse have ended, the chief executive of Euronext, Jean-François Théodore, extended the offer to join the Euronext platform to its Frankfurt rival. This is thought unlikely, however, because the German exchange's vertically integrated structure is anathema to Euronext.

Analysts believe the Frankfurt and London stock exchanges risk becoming isolated by the wave of consolidation, and the London Stock Exchange could be forced into a marriage with the US technology exchange Nasdaq.