IntercontinentalExchange Inc (ICE.N) is in talks to buy NYSE Euronext NYX.N, the operator of the New York Stock Exchange, according to a source familiar with the situation on Wednesday, in a multibillion dollar deal that could help the commodities exchange take on arch rival CME Group Inc (CME.O).
A deal could be announced as early as Thursday, the source said, declining to be named because the discussions are private.
ICE has proposed a deal that would value NYSE at $33 per share, a 37 percent premium to its closing price on Wednesday, and would be funded one-third by cash and the rest in stock, CNBC said. The Wall Street Journal first reported news of talks.
At the close of trading on Wednesday, NYSE was worth about $5.8 billion, indicating that ICE may be willing to pay roughly $8 billion for the Big Board operator.
Shares of NYSE jumped 12 percent in after-hours trading to $26.96. ICE shares rose 3.1 percent to $132.32.
Representatives for NYSE and ICE declined to comment on the reports.
The move by ICE comes nearly two years after it had jointly bid with Nasdaq OMX Group Inc (NDAQ.O) to purchase NYSE for about $11 billion, then break it up into parts that each of them would acquire. That bid competed with a plan by German exchange operator Deutsche Boerse AG (DB1Gn.DE) to acquire NYSE in a $9.3 billion deal.
But neither deal was successful, as both attempts separately ran into problems with regulators in the United States and Europe. Questions have lingered about NYSE's future as the U.S. exchange seeks to boost profits in a tough time for financial firms that rely on trading.
NYSE's biggest revenue source is U.S. stock trading, where margins have been under pressure for years. As trading volumes have declined in recent quarters, it has been even harder to boost profits.
ICE, established in 2000 by a group of banks and energy companies, is a fast-growing, profitable exchange operator that has long wanted to expand its derivatives offerings.
In NYSE's Liffe business, ICE CEO Jeff Sprecher would get an interest-rate derivatives business that eluded him when his bid for the Chicago Board of Trade failed a few years ago.
UBS analyst Alex Kramm wrote in research note that the timing of the deal made sense, with regulatory changes driving more over-the-counter contracts toward clearing houses and futures markets. NYSE is trying to build a clearing house in Europe, while ICE already owns one, he wrote.
ICE's plan to buy the NYSE on its own may not face the same challenges it faced when it teamed up with Nasdaq. That bid ran into trouble as U.S. antitrust regulators worried the deal would bring all U.S. stock listings under one roof.
ICE could now still look to divest some of the NYSE businesses, such as stocks and options exchanges, which a Big Board rival such as Nasdaq may still want.
"We struggle to see any business overlap that would result in antitrust issues for the combination," Kramm wrote. "While there is limited information on the potential deal structure, we could envision several scenarios, including one where ICE spins out NYX's non-Liffe businesses to maximize returns."
(Reporting by Lauren Tara LaCapra; additional reporting by Paritosh Bansal; Editing by Gary Hill, Jan Paschal, Phil Berlowitz and Chris Gallagher)