M&A Watch: Fallacy of Pac Man Exchange Mergers (NYX, NDAQ, ICE)

Early this morning when most people were asleep came news that the NYSE Euronext, Inc. (NYSE: NYX) was considering an opt-out of its existing merger pact with Deutsche Boerse to turn on this rival NASDAQ-ICE stock and cash joint merger offer for the NYSE.  The reports had NYSE turning and bidding on NASDAQ OMX Group Inc. (NASDAQ: NDAQ) to acquire that exchange, a move called the Pac-Man Defense.

The move would have left Intercontinental Exchange, Inc. (NYSE: ICE) holding the bag as the odd man out.  It turns out that there are no such plans or at least they are refusing to admit to it.  The report was from a French reporting agency and one of two things happened.  Either the news was wrong or the NYSE decided to float that rumor out there to see what the reaction would be.

What may be driving the shares all higher is that Deutsche Boerse appears to not want to raise its offering price.  That keeps the NYSE flag here if the deal can get approved.

We have pondered something here before and pondered it again.  It was going to be awful to see a great brand like the NYSE suddenly be swallowed up by a foreign company.  Now, there may be yet another merger of exchanges.

These same exchanges have claimed that there are effectively no real barriers to entry for potential rivals.  The public and many investment professionals would probably disagree that there are no barriers to entry to compete in the world of financial futures, stocks, options, and derivatives.

Maybe there was something, even if NYSE has refuted the report.  NYSE shares are up 1.3% at $39.50 and NASDAQ shares are up 3.4% at $28.94 today.  Even ICE shares are up 1.5% at $121.66 today.  The beat goes on.

JON C. OGG