NYSE Buying NYFIX for 95% Premium

NEW YORK, Aug 27 (Reuters) – NYSE Euronext (NYX.N) said on Thursday it would buy NYFIX Inc (NYFX.O) to improve its trading platform in a deal that almost doubled the stock price of the provider of systems to buy and sell stocks.

The transatlantic exchange operator offered $1.675 per share of NYFIX common stock, a 95 percent premium over Wednesday’s closing price. The deal, worth $144 million, also would include the acquisition of all preferred shares.

NYFIX, whose shares were up nearly 90 percent in afternoon trading on the Nasdaq, designs systems that process financial transactions and offers broker-dealer services. Market players use its systems to get quotes and to buy and sell stocks and derivatives.

“Overall, this transaction seems to represent a furthering of NYSE’s ambition to become a more important source of transaction infrastructure, beyond just providing marketplaces and related market data, in a fairly evolutionary way,” Fox-Pitt analysts said in a research note.

Credit Suisse analyst Howard Chen said: “Financial terms appear to be on the high side though overall deal size is modest.”

NYSE Euronext, the world’s largest exchange operator by the value of listings, has focused its recent acquisitions on smaller-scale technology deals. The company, formed in the merger of the New York Stock Exchange and European exchange operator Euronext in 2007, is pushing to bring all trading onto a universal trading platform by year-end.

The transaction is expected to close in the fourth quarter of 2009 and add to NYSE Euronext 2010 earnings, excluding one-time deal and restructuring costs, the company said.

The acquisition will be done through NYSE Euronext unit NYSE Technologies, whose CEO, Stanley Young, will head the NYFIX operation.

The boards of NYSE Euronext, NYSE Technologies and NYFIX have approved the acquisition, which NYFIX shareholders and regulators still need to clear.

NYFIX has posted losses the last four quarters. The bulk of its revenue comes from its FIX division, which provides channels for order routing and sells software licenses.

“The NYFIX FIX Division … expands our points of connectivity with customer trading communities,” Michael Geltzeiler, chief financial officer of NYSE Euronext said in a statement. “There are natural synergies and efficiencies that will be realized both in terms of costs and tax benefits.”

NYSE Euronext also said it will “explore various alternatives” for the brokerage business of NYFIX, which includes a dark pool, an anonymous stock trading venue. Dark pools have recently come under increased regulatory scrutiny.

“We’re not sure exactly why NYSE isn’t interested in the brokerage segment, in particular the Millennium dark pool, but it could be because it overlaps too closely with other crossing networks, because it thinks it would get substantial value in a sale, or perhaps due to potential conflicts with exchange customers or regulatory issues,” Fox-Pitt analysts said.

The Millennium dark pool accounted for 0.16 percent of U.S. equity volume in June, down nearly 40 percent from a year before, according to agency brokerage Rosenblatt Securities.

Citigroup acted as financial adviser and Wachtell, Lipton, Rosen & Katz as legal adviser to NYSE Euronext on this transaction. NYFIX was represented by Evercore Partners as financial adviser and Wilmer Hale as legal adviser.

NYSE Euronext shares fell 0.8 percent to $28.55 on the New York Stock Exchange. NYFIX shares rose 77 cents to $1.63 in Nasdaq trading.

(Reporting by Juan Lagorio, additional reporting by Jonathan Spicer, editing by Gerald E. McCormick and Derek Caney)