Thain Train

In a WSJ article this morning John Thain was fairly confident that the offer on the table will be accepted by Eurnoext in December:

"Our deal has to look economically attractive at the time they vote -- and it will"

I'm not sure how he can make this type of a guarantee when NYSE stock has been as volatile as it has been since the deal was announced in June, but let's assume for the time being that he is correct and the price of NYSE shares holds up, at least until December.

Keep that in mind while reading the following paragraph from the article:

The NYSE and Euronext plan to combine technology platforms, but not the markets they operate. European officials prefer this because it keeps U.S. regulations out of Europe. Mr. Thain said the exchanges aren't contemplating merging operations, but he did say convergence of regulation across borders would be desirable, particularly if changes are made to the U.S. Sarbanes-Oxley law.

A couple questions for Mr. Thain - Tell me again what will be combined? So the current NYSE price will hold up, but you're not merging operations? What IS merging other than the human resources and I.T. departments?

The recent NYSE appreciation seems a little steep for some new computers and a snazzy marketing campaign...I don't see how this deal can justify the recent NYSE share appreciation when the efficiencies you would expect from the deal are hampered by the details of the deal itself. The deal sounds great in principle, but I think the new shares are in for a bumpy ride. Especially when you consider that since the deal was announced, NYSE shares have outperformed Euronext shares on the back of this week's gains:


Volatility in the NYSE, as measured by a 5-day moving average of hi-low spread, is at its highest level since the merger was announced, while Euronext has logged steadier gains with less volatility.

The timing of Mr. Thain's announcement (on the heels of a 3.7% price jump in a single day) is just a little suspect - is it out of the question to think that an exchange such as the NYSE could call in a few favors to boost its share price? Conspiracy theories aside, the current valuation of the NYSE is high no matter how you look at it compared with the additional profitability and value added to the NYSE by this deal.