Deutsche Boerse to sue EU over veto of NYSE deal

Tue Mar 20, 2012 4:48am IST

The plaque of the Deutsche Boerse AG is pictured at the entrance of the Frankfurt stock exchange February 1, 2012. REUTERS/Alex Domanski

The plaque of the Deutsche Boerse AG is pictured at the entrance of the Frankfurt stock exchange February 1, 2012.

Credit: Reuters/Alex Domanski

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NEW YORK/FRANKFURT, MARCH 19 - Deutsche Boerse AG (DB1Gn.DE) plans to sue the European Commission for blocking its $9 billion merger with NYSE Euronext NYX.N, to recoup merger costs and keep the door open for future deals in the derivative markets.

The European Commission cited antitrust reasons for its February 1 decision to block the D.Boerse-NYSE merger, saying it would have led to a near-monopoly in European financial derivatives worldwide.

"Deutsche Boerse is of the view that several aspects of the decision are incorrect," the operator of the Frankfurt stock exchange said in a statement on Monday. It said it would bring the suit before the European court in Luxembourg.

Deutsche Boerse would not comment on the suit beyond its statement, but Chief Executive Reto Francioni said on a conference call last month that an appeal might force European regulators to change their definition of the derivatives markets, which does not include over-the-counter trading.

European regulators did not take into account the over-the-counter derivatives market when assessing the antitrust implications of the proposed deal.

Deutsche Boerse is concerned that allowing that definition to stand could keep it from future deals for derivatives markets in Europe, a source familiar with the company's thinking said.

The exchange operator would also attempt to recoup the $82.2 million euros it spent pursuing the failed merger, the source said.

The person, who asked to remain anonymous because of the sensitivity of the issue, said Deutsche Boerse had no plans to try to revitalize the merger with NYSE Euronext.

NYSE Euronext declined to comment.

The move to sue the European Commission for blocking a merger is unusual but not unheard of. General Electric (GE.N) unsuccessfully appealed the EU Commission decision to block its 2001 merger with Honeywell (HON.N).

"The likelihood of success is as close to zero as you can possibly measure," said Evan Stewart, an antitrust lawyer and managing partner at Zuckerman Spaeder LLP in New York.

He said it was also highly unlikely that the exchange operator would be able to recover any monetary damages from the government body.

In arriving at its decision to block the deal, the European Commission said it consulted more than 700 market participants and stakeholders.

The proposed merger was just one of several international deals among exchanges to have failed in the past year.

Nasdaq OMX (NDAQ.O) and IntercontinentalExchange Inc's (ICE.N) bid for NYSE Euronext was rejected by the U.S. Department of Justice. London Stock Exchange's (LSE.L) takeover of TMX Group (X.TO) was rejected by shareholders of the Toronto Stock Exchange operator, and Singapore Exchange Ltd's (SGXL.SI) bid for Australia's ASX Ltd (ASX.AX) was stopped by the Australian government.

(Reporting by Jonathan Gould in Frankfurt and John McCrank in New York; Editing by Gerald E. McCormick and Steve Orlofsky)