SEC Approves NYSE Takeover of Archipelago
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The New York Stock Exchange’s plan to take over Archipelago Holdings and end 213 years as a member-owned stock market received final approval yesterday from the Securities and Exchange Commission.
Buying Archipelago, a Chicago-based electronic market, will enable the world’s largest stock exchange to compete better with the Nasdaq Stock Market and to expand into options trading. NYSE members will receive about $7.6 billion of cash and stock in NYSE Group, the combined company.
“There is the demutualization and the merger of these two exchanges, and any one of those alone would be a landmark decision,” the director of the Financial Markets Research Center at Vanderbilt University in Nashville, Tenn., Hans Stoll, said. “The demutualization is perhaps more so because the New York Stock Exchange, since its inception in 1792, had been a kind of club.”
The decision, announced by the SEC in an e-mailed statement, removes the last obstacle for the deal and marks a victory for NYSE Chief Executive Officer John Thain, who sought the merger. The SEC’s review focused on how the exchange will insulate its regulatory unit from conflicts of interest with NYSE Group. “This will mark the beginning of a new era for the Exchange and America’s financial markets,” Mr. Thain said in a statement.
The NYSE said in an e-mailed statement that it will complete the merger on March 7 and shares of NYSE Group will start trading the next day. The exchange’s 1,366 members will receive a 70% stake in NYSE Group. The standard terms call for payment of 80,177 shares and $300,000 in cash for each seat, or membership.
The value of the stock portion has more than tripled to $5.27 million since the deal was announced on April 20 amid a surge in Archipelago’s share price. Archipelago holders will receive one share of NYSE Group for each share they own.
Seat prices rose as high as $4 million before the exchange halted sales in December. When the agreement was reached, seats were valued at $1.62 million.
The members and Archipelago’s investors voted to approve the deal in December. U.S. antitrust regulators gave clearance in November.
Mr. Thain also settled a lawsuit filed by a group of 10 members, led by William Higgins, who claimed the exchange was overpaying for Archipelago. The settlement, affirmed by a New York State judge on February 21, cost a total of $12.6 million.
The NYSE and Archipelago together handled one of every two shares of companies and exchange-traded funds that traded on U.S. equity markets last year.
