IntercontinentalExchange is in talks to buy New York Stock Exchange owner NYSE Euronext, in a multi-billion dollar deal designed to push it into the big league of European derivatives and take on arch rival CME Group.
ICE may consider a spin-off or sale of NYSE's stock markets, a source told Reuters. As well as the 200-year old New York exchange, the NYSE also owns bourses in Paris, Amsterdam, Brussels and Lisbon.
"We can't exclude any option at this stage. It's all down to what regulators will require to get the deal approved, and to the timeframe they will give ICE to meet these targets," a source familiar with the situation told Reuters, adding that a deal was expected to be announced later on Thursday.
ICE has proposed buying NYSE , which also owns derivatives market Liffe, for $33 per share, a 37 percent premium to its Wednesday closing price, CNBC said.
One-third of the deal would be funded by cash and the rest in stock, the source confirmed.
NYSE and ICE representatives declined to comment.
Analysts said a deal would give Atlanta-based ICE a strategic boost with control of Liffe, Europe's second-largest derivatives market, helping it compete against U.S.-based CME Group Inc , owner of the Chicago Board of Trade.
"ICE is after Liffe, that is the crown jewel of NYSE Euronext. ICE could potentially sell the US and European equities business, but could struggle to find a buyer. A spin-off of this business could be more likely," said Peter Lenardos, analyst at RBC Capital Markets.
"Strategically it makes sense for ICE to enter the European derivatives space in a meaningful way, but paying $10 billion - with debt - to do so sounds generous for NYSE shareholders and expensive for ICE shareholders.
At the close of trading on Wednesday, NYSE was worth about $5.8 billion, indicating that ICE may be willing to pay roughly $8 billion for the owner of the world's largest stock market.
NYSE shares jumped 12 percent in after-hours trading to $26.96. ICE shares rose 3.1 percent to $132.32.
An ICE-NYSE Euronext tie-up would leap-frog Deutsche Boerse to become the world's third-largest exchange group with a combined market value of $15.2 billion. CME Group, ICE's largest U.S.-based rival, has a market value of $17.5 billion, Thomson Reuters data shows.
Hong Kong Exchanges and Clearing <0388.HK> is the world's largest exchange group with a market capitalization of $19.5 billion.
ICE's main operations are in energy futures trading and unlike NYSE Euronext, it has steered clear of stocks and stock-options trading, so there is not much business overlap between the two groups, making it more likely competition authorities would approve a tie-up.
Last year, the U.S. Justice Department blocked a $11 billion joint hostile bid by ICE and Nasdaq OMX Group for NYSE Euronext on concerns the tie-up would dominate U.S. stock listings.
If that bid had succeeded, ICE planned to buy NYSE Euronext derivatives business while Nasdaq would have taken control of the stock exchanges.
A rival $9.3 billion bid by German exchange operator Deutsche Boerse also ran afoul of regulators.
"I doubt the competition authorities will have a problem with it, there's only a modest overlap between the businesses," said Richard Perrott, an analyst at Berenberg Bank.
"The rationale for the deal will be the same as that with Deutsche Boerse - migrate the clearing of Liffe derivatives to ICE's services in London and scale up to attract OTC (Over The Counter) derivatives clearing. There could be more than $300 million in cost savings in the deal."
Before the latest ICE offer emerged, NYSE Euronext's shares haD fallen by nearly a third since ICE and Nasdaq launched their thwarted joint bid.
The New York Stock Exchange, known as the Big Board and the symbol of U.S. capitalism, has seen its clout fade as new technology and the rise of private trading venues run by Wall Street banks and brokers cut its margins.
Founded in 2000 as a U.S. electricity trading platform backed by Wall Street banks and energy traders, ICE is the product of a string of acquisitions, from the London-based International Petroleum Exchange in 2001 through the New York Board of Trade and, most recently, a handful of smaller deals, including a climate exchange and a stake in a Brazilian clearing house.
(Additional reporting by Luke Jeffs in London. Writing by Carmel Crimmins; Editing by Helen Massy-Beresford)