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NYSE closes $10B Archipelago acquisition

By Daily Herald - | Mar 7, 2006

NYSE closes $10B Archipelago acquisition

NEW YORK — The New York Stock Exchange closed its $10 billion acquisition of electronic rival Archipelago Holdings Inc. Tuesday, a move that turned the 214-year-old not-for-profit exchange into a publicly traded company with advanced trading technology.

The new NYSE Group Inc. will begin trading Wednesday on the floor of the Big Board under the ticker symbol NYX. Its new equity, the majority of which is still held by the NYSE’s former seat holders, will help the exchange expand into new businesses, such as derivatives trading, and could fund acquisitions as well.

The NYSE and Archipelago will continue to operate separately under the NYSE Group umbrella, at least for a short time. Eventually, the exchange hopes to allow its floor traders access to the Arca electronic trading platform, which would give them the ability to trade Nasdaq-listed stocks as well as equity options.

NYSE Chief Executive John Thain, who will continue as CEO of NYSE Group Inc., shocked seat owners and floor traders when he announced the Archipelago deal on April 20, 2005. Thain, who took over the job in early 2004, had said the NYSE was interested in going public, but also had said he expected the process to take far longer.

Goldman Sachs Group Inc., where Thain served as a top executive prior to joining the NYSE, served as the adviser to both the NYSE and Archipelago. While not unheard of, Goldman’s role prompted a group of seat holders to file suit against the NYSE, saying the deal undervalued the Big Board. That suit was settled Nov. 15 after Citigroup issued a separate fairness opinion on the deal.

Under the final agreement, owners of the 1,366 seats on the NYSE received 80,177 shares of NYSE Group stock plus $300,000 in cash and another $70,571 in dividends. At Tuesday’s closing price of $64.25, the deal valued each seat at approximately $5.5 million. One third of the seat holders’ stock can be sold in a secondary offering set for April or May, with the other two thirds locked up for another one to two years.

Archipelago shareholders, who saw the value of their stock jump from $16.90 before the announcement last year, will trade their Arca shares for NYSE Group stock on a one-for-one basis.

Now that the exchange is public, Thain hopes to expand trading in corporate bonds and equity options, and has repeatedly said the NYSE will look at acquiring other exchanges or markets, both in the United States and abroad.


On the Net:

The New York Stock Exchange: http://www.nyse.com

Archipelago Holdings Inc.: http://www.arcaex.com

This story appeared in The Daily Herald on page D6.


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