Shareholders of NYSE Euronext (NYSE:NYX), the owner of the 220-year-old New York Stock Exchange, are not pleased with IntercontinentalExchange’s (NYSE:ICE) proposed $8.2 billion takeover of the exchange operator.
Two lawsuits have been brought against Euronext since the deal was announced last week. As Reuters reported on Wednesday, the New Jersey Carpenters Pension Fund filed a complaint in New York State Supreme Court in Manhattan on Friday alleging that “NYSE Euronext breached its duty to maximize returns for shareholders.” With this lawsuit, the pension fund is looking to secure class action status on behalf of other shareholders and to block the sale of the exchange operator. Samuel Cohen, an individual shareholder, has also attempted to stop the deal. On Friday, he filed a proposed a class action in Delaware Chancery Court.
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ICE’s offer valued the company at $33.12 per share, a price that represented a 28 percent premium to NYSE Euronext’s closing price on December 19. But as both lawsuits show, shareholders found ICE’s proposal to severely undervalue the company. In court papers seen by Reuters, the pension fund said the deal was based on a “hopelessly flawed process,” meant to benefit NYSE Euronext Chief Executive Duncan Niederauer and members of the company’s board of directors.
CHEAT SHEET Analysis: Will these lawsuits be a negative catalyst for Euronext’s stock?
One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. Following the announcement that NYSE Euronext had agreed to sell itself to IntercontinentalExchange last Thursday, the exchange operator’s stock price soared. However, with two lawsuits already filed in the short time since the deal went public, the takeover’s proceedings could be hampered, if not halted permanently. But if the deal is completed, ICE has said it will try to spin off Euronext’s European stock market businesses, as profits from stock trading have shrunk in comparison to those of derivative trading. ICE’s plans to divest itself of the European stock market have led to speculation that the New York Stock Exchange will also be spun off as an independent public company.