Bloomberg News

Deutsche Boerse Plans Dividend, Buyback After NYSE Deal Fails

February 15, 2012

Feb. 14 (Bloomberg) -- Deutsche Boerse AG, blocked from buying NYSE Euronext by European competition regulators this month, pledged to return capital to shareholders after posting a fourth-quarter profit.

Deutsche Boerse yesterday proposed paying a dividend of 3.30 euros, comprising a special dividend of 1 euro a share and a regular dividend of 2.30 euros, and said it will spend as much as 200 million euros on buybacks in the second half of 2012.

“It’s a nice juicy capital return, an attractive level for this year,” said Richard Perrott, an exchange analyst at Berenberg Bank in London who has a “buy” rating on the stock. “It’s a sweetener to shareholders who will be disappointed after the long, drawn-out, NYSE saga. The capital return is positive as the results themselves are largely in line with expectations.”

Fourth-quarter earnings before interest and taxes at Europe’s largest exchange by market value was 228 million euros ($301 million), compared with a loss of 219.3 million euros a year earlier, the Frankfurt-based company said in a statement yesterday. Fourth-quarter revenue increased 4.4 percent to 541.4 million euros, while net income was 141.9 million euros versus a loss of 61.2 million euros in 2010.

Both NYSE Euronext, which last week reported income that beat forecasts, and Deutsche Boerse are shifting their strategy back to expanding current operations after the European Commission blocked their merger. Deutsche Boerse agreed to buy its New York-based rival in a deal valued at $9.53 billion when it was announced last February.

Moving Forward

“After the EU Commission’s decision, our view is exclusively forward,” Reto Francioni, chief executive officer of the exchange, said in an e-mailed statement. “We will now accelerate our growth strategy with an offensive on unregulated and unsecured markets, an extension of our leadership role in technology and market data, and by partnering further with infrastructures and customers in growth areas and regions. Our outlook for 2012 is positive.”

The exchange operator also said Michael Kuhn, chief information officer, will leave the company after 23 years as it combines its information services and market data units. Kuhn’s contract won’t be renewed when it expires at the end of the year, Deutsche Boerse said.

Deutsche Boerse’s costs fell to 310.8 million euros in the fourth quarter, down 5.2 percent from a year earlier.

New System

After the NYSE Euronext deal was terminated, Deutsche Boerse said its Eurex futures exchange will move to a new trading system in the fourth quarter this year, the first step in the new standalone strategy. The platform is being developed internally and will be based on one already in use at the International Securities Exchange, the U.S.-based options market owned by Deutsche Boerse and Eurex.

On Feb. 1, European Union regulators vetoed a plan to create the world’s biggest exchange, after concluding that the merger would hurt competition. Deutsche Boerse called it “a black day for Europe and for its future competitiveness.”

The deal would have led to a “near-monopoly” in European exchange-traded derivatives, uniting both Eurex, the region’s largest derivatives exchange, and NYSE Euronext’s Liffe, the second-largest. Any savings would “not be substantial enough to outweigh the harm to customers caused by the merger,” the European Commission said.

Deutsche Boerse’s acquisition of NYSE Euronext would have put more than 90 percent of Europe’s exchange-traded derivatives market and about 30 percent of stock trading in the hands of one company.

The company holds a press conference in Frankfurt later today.

--Editors: Nick Baker, Stephen Kleege

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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