NYSE Settles Archipelago Lawsuit

The New York Stock Exchange settled a lawsuit that threatened to block the world’s largest stock market from combining with Archipelago Holdings and going public.Under the settlement, the NYSE agreed to have an investment bank perform an independent evaluation of the transaction. The accord appeased a dissident group of members that claimed the terms were the result of conflicted advice from Goldman Sachs, which worked for both sides.“The whole function of the lawsuit was to get information that was untainted to the members,” one of the 10 members who sued, William Caldwell, said.The settlement helps clear the way for the NYSE to take over Chicago-based Archipelago, creating a company with a $7.65 billion market value. Big Board members and Archipelago shareholders are scheduled to vote December 6.Lawyers, gathered in New York Supreme Court for a second day of hearings in the case, drafted the accord in the courtroom. The exchange will select an independent adviser by tomorrow with approval by the plaintiffs. The adviser’s report must be sent to members no later than five days before the vote.The plaintiffs will drop their case and allegations that the board of directors and executives breached their fiduciary duty. Financial terms of the deal will not change.Under the proposed merger, the NYSE gets a 70% stake in the combined company, NYSE Group, and Archipelago gets the rest. Each Big Board member will receive 80,177 shares of the new entity and $300,000 in cash. They can elect to receive more stock and less cash, or vice versa. Archipelago’s holders will get one share of NYSE Group for each of their shares.The 70-30 split became a point of contention for a former floor broker who filed the lawsuit in May, William Higgins. He argued that the deal ceded too much to the Chicago-based electronic market and was not negotiated fairly by John Thain, NYSE chief executive and a former Goldman president.“The 70-30 doesn’t change, but you have an independent look,” said James Sabella, a lawyer for New York-based Grant & Eisenhoffer representing the dissident group. “Discussions started before lunch. Everyone started to realize that this was a case that could come to a resolution.”The Higgins-led group was not satisfied with the fairness opinion drafted by Lazard, which was hired to perform that task less than a month before its May initial public offering, underwritten by Goldman. Goldman is also Archipelago’s second-largest shareholder.Fees for the plaintiffs’ lawyers will be decided by New York State Supreme Court Judge Charles Ramos, who reserved the right to delay the transaction vote if there are any snags in delivering the new review to seat holders.“We are pleased with the resolution of this litigation, which allows our members to vote as planned on the proposed merger,” Mr. Thain said in a statement. “This resolution is in the best interest of members, the future of the NYSE, and America’s capital markets.”

NYSE Settles Archipelago Lawsuit

NYSE Settles Archipelago Lawsuit

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