Deutsche Boerse-NYSE Merger to be Incorporated in Netherlands

Despite the presence of enduring concerns about the Deutsche Börse and NYSE Euronext merger being completed due to other potential bidders and other political concerns, the companies have announced today their tie-up plans for the merger, which are projected to construct a company with 2010 net revenues of $5.4 billion. This deal signifies the creation of the world’s largest financial exchange group with 60 percent of shares owned by Deutsche Börse shareholders and the remaining 40 percent owned by NYSE shareholders, as reported by the Wall Street Journal. The plans also indicate that while the company’s headquarters will remain in New York and Frankfurt, the also plan to incorporate their ‘holding company’ in the Netherlands.

If the deal does go through, the Wall Street Journal indicates that this is another example of multi-national company’s preference for tolerant tax policies and its legal base. While Dutch citizens experience some of the highest income taxes in Europe, corporate taxes are among the lowest in Europe. The move is a prudent one on the part of the companies as the Netherlands has long been used as a base for large international corporations. Additionally, as the merged companies anticipate generating the majority of their revenue from Europe, the geographic location of the company is also sensible.

While the sensibility of these aspects of the company’s rationale has gone without question, a recent statement from Alasdair Haynes, the chief executive of Chi-X Europe (the major share-trading platform in Europe) has begun to critique the logic of the merger altogether. He stated in an interview that the merged company would be unable to compete with Chi-X Europe, because of its sheer size. While this merged company would have thousands of employees, Chi-X Europe employs only 50. This means that the merged company will be forced to charge higher fees potentially making it less popular in Europe as a trading platform. He went on to say that the scope of the platform is too limited, and fails to target any equity trading opportunities outside of Germany, France, the Netherlands, Belgium, and Portugal.

Sources:

http://www.reuters.com/article/2011/02/15/exchanges-chixeurope-idUSLDE71D0NW20110215

http://www.reuters.com/article/2011/02/15/us-deutscheboerse-results-idUSTRE71E5NT20110215

http://online.wsj.com/article/SB10001424052748704409004576146384199592002.html?mod=googlenews_wsj