The European Union has vetoed a proposed merger of Deutsche Boerse and NYSE Euronext to create the world’s largest exchange, after measures proposed by the two companies failed to satisfy the Competition Commission. The European Commission characterized the proposal as leading to a “near-monopoly” that would bring harm to customers.
Bloomberg reported Wednesday that the EC said such a merger would harm competition. It is the fourth merger prohibition enacted by the commission since 2004, when it instituted new rules on the review of such deals. In a statement, the EC said that the arrangement would have led to a “near-monopoly” in European exchange-traded derivatives, and added, “Any efficiencies would not be substantial enough to outweigh the harm to customers caused by the merger.”
The deal, valued at $9.5 billion when originally agreed to by Deutsche Boerse and NYSE Euronext in February 2011, has dropped to around $7.3 billion as Deutsche Boerse’s shares have fallen. Both companies resorted to a direct appeal to Jose Barroso, president of the commission, in January in an effort to salvage the deal, saying that forbidding the merger would harm European exchanges and send business to other parts of the world.
Had the merger proceeded, the acquisition of NYSE Euronext by Deutsche Boerse would have consolidated more than 90% of Europe’s exchange-traded derivatives market and about 30% of stock trading with a single company.
The two companies had offered to sell overlapping businesses and provide access to post-trade services to rivals in an effort to persuade regulators that the move would not squash competition. However, in December the EC told both companies that their concessions were not extensive enough.
Competition Commissioner Joaquin Almunia said in the EC statement, “We tried to find a solution, but the remedies offered fell far short of resolving the concerns. These markets are at the heart of the financial system and it is crucial for the whole European economy that they remain competitive.”
Deutsche Boerse was critical of the decision, issuing a statement that said in part, “This is a black day for Europe and for its future competitiveness on global financial markets. The EU Commission’s decision is based on an unrealistically narrow definition of the market that does no justice to the global nature of competition in the market for derivatives. We therefore regard the decision as wrong.”
Antitrust officials had previously told the companies that they would have to divest of an entire derivatives business in order to proceed. Neither company was willing to consider such an action.