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Categorized | Equities

EU to rule on D Börse and NYSE merger

Posted on January 31, 2012


The NYSE Euronext and Deutsche Börse tie-up on Wednesday faces its day of reckoning in Brussels, as European Union commissioners are expected to sign-off a recommendation to block a merger that allegedly stifles competition.

Senior officials are confident that a clear majority of the 27 European commissioners will back Joaquín Almunia, the competition commissioner, and prohibit the bid. But it is likely to come after an extremely contentious and rare debate at the full college of commissioners, a discussion of the like not seen in Brussels since merger control rules were pioneered in the early 1990s against stiff resistance from supporters of dirigiste industrial policy.

The potential dissenters are being led by Michel Barnier, the EU’s top financial regulator, who is determined to air his views on the merger
particularly given the sweeping market reforms he is overseeing.

“It is normal and legitimate that the college of commissioners have a discussion on these kinds of issues,” Mr Barnier told the Financial Times.

“The decision will have to be taken on the balance of two things: the rigorous application of competition law in current circumstances and the evolution we will see in the European financial landscape.”

Some senior EU officials expect Mr Barnier will achieve no more than a dissenting note in the meeting minutes – a declaration that will not save the merger but will infuriate Mr Almunia by raising questions over his judgment.

A more serious rebellion in the typically consensual college would be a watershed moment in Brussels, reviving debates over whether competition policy is a quasi-legal verdict or a more political process that supports the rise of “European champions”.

Typically competition commissioner’s recommendations are treated with some deference and waved through. While politics plays a role in the most controversial cases, the negotiation is usually settled behind the scenes.

An ideal outcome for the merger parties would be a week’s delay to the decision, in which Mr Almunia will be asked to check whether any more concessions are possible to allay competition concerns. If Mr Almunia wins as expected, the meeting will sign-off the European Commission’s 22nd merger prohibition.

Mr Barnier is sympathetic to the case that the merger will boost Europe’s ability to compete globally in listed derivatives at a time when the US and Asia show no signs of opening up their market structures.

“It is pretty much unprecedented in recent years to have this sort of discussion,” said Stephen Kinsella, a partner at the law firm Sidley Austin. “Although it is ultimately a college vote, it’s generally accepted that the competition commissioner makes his recommendation and the others defer to that.”