ONE of Euronext’s fiercest critics and its biggest shareholder turned tail yesterday and backed an €8 billion (£5.5 billion) merger between the European stock market operator and its New York rival.

Atticus, the giant US hedge fund that owns 9 per cent of Euronext, said that it would support a tie-up with the New York Stock Exchange (NYSE) after previously insisting that Euronext strike a deal with Deutsche Börse, the German rival.

A spokesman for Atticus, which also holds a large stake in the NYSE, said: “We support the deal. We think it creates significant value for shareholders of both companies, we are excited about the prospects and we believe the market continues to underestimate the earnings power of NYSE.”

Announcing details of a merger that will create a transatlantic stock exchange worth more than €15 billion, John Thain, the NYSE’s chief executive, promised to shave at least €250 million off the enlarged company’s technology budget. He said the savings were conservative and deliverable. The former Goldman Sachs star banker added that the merger would provide the NYSE with a European bridgehead to attract companies that had been deterred from listing in the US because of increasingly onerous regulations. “This is a positive step for free trade and globalisation,” he said.

Euronext shareholders will receive €21.32 cash and 0.980 shares in the newly merged exchange for each share they own in the European exchange. They will also receive a one-off dividend of €3 a share. Shareholders in the NYSE will receive shares in the new entity on a one-for-one basis.

Jean-François Théodore, the chief executive of Euronext, was at pains to point out that the deal was a merger of equals, although NYSE shareholders will own a clear majority of the combined company. The deal has been approved by both boards but has yet to be cleared by regulators or shareholders.

NYSE-Euronext will handle more than €80 billion of share deals each day and will list companies worth €21 trillion. The deal will unite the stock markets of Paris, Brussels Amsterdam, and Lisbon with Wall Street and will include London’s derivatives market, Liffe.

The new market operator will have its headquarters in the US but will trade on exchanges in Europe and New York. London will remain the centre for derivatives business.

The alliance will inject fresh urgency into the merry-go-round of merger talks between stock exchange bosses in London, Frankfurt, Paris and New York. Talks between Euronext and Deutsche Börse collapsed last month. Euronext said yesterday that talks with the Frankfurt exchange had ended but emphasised that no break fee had been agreed with the NYSE, potentially leaving the door open for further negotiations. In a sign that Euronext remains ready to assimilate exchanges on its home turf, M Théodore confirmed that merger talks with the Italian bourse would start as early as next week.

The NYSE-Euronext deal could prove particularly challenging to the London Stock Exchange, which is effectively blocked from entering into any merger discussions by Nasdaq, which holds a crucial 25 per cent stake in the business.

TRADING PLACES

1957: The Los Angeles and San Francisco stock exchanges merge to create Pacific Stock Exchange

2000: The Amsterdam, Brussels and Paris stock exchanges merge to form Euronext

2001: Archipelago establishes a new exchange as a subsidiary to Pacific Exchange

2002 (Jan): Euronext scoops Liffe from under the nose of LSE in hotly contested auction

2002 (Feb): Euronext snaps up the Portuguese Stock Exchange

2004: Euronext expresses interest in making a bid for LSE but stops short of tabling an offer

2005: Archipelago acquires Pacific Stock Exchange

2006 (Feb): Deutsche Börse expresses interest in merging with Euronext

2006 (March): NYSE merges with Archipelago

2006 (May): Euronext ends merger talks with LSE and holds out hopes for a merger with Deutsche Börse. Later rejects offer from the German exchange

2006 (June): NYSE merges with Euronext.

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