A rival bidder may complicate the New York Stock Exchange's plans to merge with Archipelago Holdings Inc. Kenneth Langone, co-founder of Home Depot and a former NYSE director, has called a meeting of Wall Street bigwigs to discuss a plan for acquiring the NYSE, the Wall Street Journal reported Monday. Spokesmen for Langone, NYSE, and Archipelago declined to comment.
Under the terms of the deal unveiled by NYSE last week, which NYSE members and Archipelago shareholders must approve, the NYSE would pay $400 million cash to NYSE members, who would get 70% ownership of the combined companies; Archipelago shareholders would get the other 30%.
Langone reportedly is upset that Goldman Sachs acted as adviser to both NYSE and Archipelago, and believes that NYSE seat holders got short-changed as a result. Langone is a close ally of former NYSE chairman Dick Grasso and lacks the credibility to mount a serious attempt to derail the deal, says Jodi Burns, senior analyst at Celent Communications. "Most people in the industry view him as a troublemaker," she says. However, "other seat holders have also said the price isn't right," she says.
The NYSE holds about an 80% share of the market for trading securities listed on the NYSE; Nasdaq, after its acquisition of Inet, will hold between a 60% and 65% of the market for trading equities not listed on the NYSE.
The concentration of liquidity for U.S. equities into two large markets--NYSE and Nasdaq--could be harmful to competition, and regulators ought to take a closer look, Burns says. "The Securities and Exchange Commission would be appropriately concerned about four markets combining into two, with each market not having quite monopoly share but close."