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Hedge Funds Support Merger Between Euronext And Deutsche Boerse

by Ulrika Lomas, Tax-News.com, Brussels

09 November 2005


Hedge funds are reportedly seeking a merger between the two European financial exchange operators Deutsche Boerse and Euronext in order to create greater value for investors.

According to a report by Reuters, hedge funds have been seeking hidden value through corporate activism during the past year by focusing on European exchanges, which possess a natural monopoly, have steady cash flows and strong reserves and are saddled with little or no debt.

It is believed that hedge funds want to see a 'nil premium' merger between the Frankfurt-based Deutsche Boerse, and Euronext, which trades across markets in Belgium, France, the Netherlands, Portugal and the UK. This would allow cost savings to be shared equally between the shareholders of the two companies.

"Hedge funds who hold shares in Euronext or Deutsche Boerse or both would prefer to see a merger between the two," one hedge fund manager told Reuters.

"That would provide maximum opportunity for cost-cutting and savings," the manager added.

Between them, Euronext and Deutsche Boerse control virtually all of the exchange-traded derivatives markets in Europe, and about half of the global total.

Both exchanges have expressed an interest in acquiring the London Stock Stock Exchange, although the latter's bid was abandoned earlier this year after opposition from major shareholders led by the hedge funds Atticus Capital and The Children's Investment Trust.


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