F-4 1 df4.htm FORM F-4 Form F-4
Table of Contents

As filed with the U.S. Securities and Exchange Commission on April 7, 2011

Registration No. 333-[]

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM F-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

Alpha Beta Netherlands Holding N.V.

(Exact name of registrant as specified in its charter)

 

 

Alpha Beta Netherlands Holding N.V.

(Translation of registrant’s name into English)

 

 

The Netherlands   6200   Not Applicable
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)

Marcus P. Thompson

Stéphane Biehler

Beursplein 5

1012 JW Amsterdam

The Netherlands

+31 (0) 20 550-4444

Fax: +31 (0) 20 550-4954

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

CT Corporation

111 Eighth Avenue

New York, New York 10011

+1 (212) 894-8940

Attention: Service of Process Department

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Dr. Roger Müller, Esq.

Deutsche Börse AG

Mergenthalerallee 61

65760 Eschborn

Germany

+49 (0) 69 2 11 0

Fax: +49 (0) 69 2 11 13 801

  

Scott I. Sonnenblick, Esq.

Jeffrey C. Cohen, Esq.

Linklaters LLP

1345 Avenue of the Americas

New York, New York 10105

+1 (212) 903-9000

Fax: +1 (212) 903-9100

  

John K. Halvey, Esq.

NYSE Euronext

11 Wall Street

New York, New York 10005

+1 (212) 656-3000

Fax: +1 (212) 656-5848

  

David C. Karp, Esq.

David K. Lam, Esq.

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

+1 (212) 403-1000

Fax: +1 (212) 403-2000

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering.   ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering.  ¨

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ¨

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  x

CALCULATION OF REGISTRATION FEE

 

 

Title of Class of

Securities to be Registered

 

Amount

to be

Registered(1)

 

Estimated
Maximum

Offering Price

Per Share

 

Estimated
Maximum
Aggregate

Offering Price(2)

  Amount of
Registration Fee(3)

Ordinary shares, nominal value of €1.00 per share

  321,864,812   Not applicable   $24,482,786,883   $2,842,451.56
 
 

 

(1) The number of ordinary shares, nominal value €1.00 per share, of the registrant (“Holdco shares”) being registered is based upon the sum of (1) the product obtained by multiplying (a) 269,579,932 shares of common stock, par value $0.01 per share, of NYSE Euronext (“NYSE Euronext shares”) estimated that will be outstanding, on a fully diluted basis, immediately prior to the merger (as defined in the prospectus included in this Registration Statement) times (b) an exchange ratio of 0.47, and (2) the product obtained by multiplying (a) 195,162,244 ordinary shares of Deutsche Börse AG (the “Deutsche Börse shares”) estimated that will be outstanding, on a fully diluted basis, immediately prior to the completion of the exchange offer (as defined in the prospectus included in this Registration Statement) times (b) an exchange ratio of 1.00.
(2) Pursuant to Rule 457(c) and Rule 457(f), and solely for the purpose of calculating the registration fee, the market value of the securities to be offered was calculated as the sum of (1) the product of (a) 269,579,932 NYSE Euronext shares, estimated to be outstanding, on a fully diluted basis, immediately prior to the merger times (b) the average of the high and low sales prices of NYSE Euronext shares on the New York Stock Exchange on March 31, 2011 and (2) the product of (a) 195,162,244 Deutsche Börse shares estimated to be outstanding, on a fully diluted basis, immediately prior to the exchange offer (b) the average of the high and low sales prices of Deutsche Börse shares on the Frankfurt Stock Exchange on March 31, 2011 (converted into U.S. dollars on the basis of an exchange rate of 1 euro = $1.42, the closing euro-to-U.S. dollar exchange rate as of March 31, 2011, as reported by The Wall Street Journal).
(3) Calculated by multiplying the estimated aggregate offering price of securities to be registered by 0.0001161.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended (the “Securities Act”), or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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EXPLANATORY NOTE

This Registration Statement contains two forms of prospectuses:

 

   

a prospectus that will be used as a proxy statement in connection with the NYSE Euronext special meeting of shareholders being held on [], 2011 to, among other things, adopt the business combination agreement, dated as of February 15, 2011, by and among NYSE Euronext, Deutsche Börse AG, Alpha Beta Netherlands Holding N.V. (which is referred to in this document as “Holdco”) and Pomme Merger Corporation and approve the transactions contemplated thereby (which is referred to in this document as the “proxy statement/prospectus”); and

 

   

a prospectus that will be used in connection with the exchange offer of Holdco shares for Deutsche Börse shares (which is referred to in this document as the “exchange offer prospectus”).

The proxy statement/prospectus and the exchange offer prospectus are identical in all respects, except that:

 

   

the Notice of the Special Meeting of Shareholders of NYSE Euronext and the sections entitled “Questions and Answers About Procedures for the NYSE Euronext Special Meeting,” “Summary — NYSE Euronext Special Meeting,” “The Special Meeting of NYSE Euronext Shareholders,” “Holdco Unaudited Pro Forma Condensed Consolidated Financial Information,” “Proposal 1: The Combination Proposal,” “Proposal 2: Holdco Articles of Association Proposal” and “Proposal 3: The Shareholder Adjournment Proposal” appear only in the proxy statement/prospectus;

 

   

the exchange offer prospectus will contain additional sections entitled “Summary — The Exchange Offer,” “General Information — Responsibility for the Contents,” and “General Information — Purpose of this Document.” The “Summary” section of the exchange offer prospectus will contain certain information that differs from the “Summary” section of the proxy statement/prospectus, in each case as described in the pages in the section entitled “Alternate Information for the Exchange Offer Prospectus” beginning on page ALT-1. In addition, the summary will contain no cross-references to the main body of the exchange offer prospectus;

 

   

the exchange offer document (which is referred to in this document as the “exchange offer document”), which has been prepared in accordance with the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz), and which is attached in the section entitled “Alternate Information for the Exchange Offer Prospectus” on pages ALT — 42 to ALT — 126, will form the main body of the exchange offer prospectus and include the section entitled “Holdco Unaudited Pro Forma Condensed Consolidated Financial Information” as “Illustrative Holdco Unaudited Condensed Consolidated Financial Information”;

 

   

the section entitled “Certain Material Tax Considerations” in the exchange offer prospectus summarizes certain material tax considerations to holders of Deutsche Börse shares and the section entitled “Certain Material Tax Considerations” in the proxy statement/prospectus summarizes certain material tax considerations to holders of NYSE Euronext shares. The “Certain Material Tax Considerations” that will be included as part of the exchange offer prospectus is set forth in the section entitled “Alternate Information for the Exchange Offer Prospectus”; and

 

   

the table of contents, as well as the page numbers, of each document will be different as a result of the differences outlined above.


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The information contained in this document is subject to completion or amendment. A registration statement relating to these securities has been filed with the United States Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document is not an offer to sell these securities and it is not soliciting an offer to buy these securities, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

 

SUBJECT TO COMPLETION, DATED APRIL 7, 2011

 

PROXY STATEMENT OF

NYSE EURONEXT

  

PROSPECTUS OF

ALPHA BETA NETHERLANDS HOLDING N.V.

LOGO    LOGO

To the Shareholders of NYSE Euronext:

NYSE Euronext and Deutsche Börse AG (which is referred to in this document as “Deutsche Börse”) have entered into an agreement providing for a combination of their businesses under a new Dutch holding company, currently named Alpha Beta Netherlands Holding N.V. (which is referred to in this document as “Holdco”). Deutsche Börse Group’s business will be brought under the new holding company through an exchange offer (which is referred to in this document as the “exchange offer”), and NYSE Euronext’s business will be brought under the new holding company through a merger (which is referred to in this document as the “merger” and which, together with the exchange offer, is referred to in this document as the “combination”). The combination is expected to create the world’s largest exchange group by revenue.

In the exchange offer, Deutsche Börse shareholders will be offered the right to exchange each of their ordinary shares of Deutsche Börse (which is referred to in this document as a “Deutsche Börse share”) for one ordinary share, nominal value €1.00 per share, of Holdco (which is referred to in this document as a “Holdco share”).

The merger will occur immediately after the completion of the exchange offer. In the merger, each NYSE Euronext share will be converted into the right to receive 0.47 of one Holdco share.

Upon completion of the combination, and assuming that all of the outstanding Deutsche Börse shares are exchanged in the exchange offer, former Deutsche Börse shareholders and former NYSE Euronext shareholders will own approximately 60% and 40%, respectively, of the outstanding Holdco shares. Based on the current number of outstanding Deutsche Börse shares and shares of NYSE Euronext common stock, par value $0.01 per share (which are referred to in this document as “NYSE Euronext shares”), and assuming that all of the outstanding Deutsche Börse shares are exchanged in the exchange offer, Holdco will issue approximately 318.0 million Holdco shares in the combination. Holdco intends to apply to list the Holdco shares on the New York Stock Exchange (trading in U.S. dollars), the Frankfurt Stock Exchange (trading in euros) and Euronext Paris (trading in euros), subject to official notice of issuance. NYSE Euronext shares, which are listed on the New York Stock Exchange and Euronext Paris under the symbol “NYX,” will be delisted from the New York Stock Exchange and Euronext Paris as soon as practicable after the completion of the combination, as permitted by applicable law.

In order for the combination to be completed, the business combination agreement must be adopted by the NYSE Euronext shareholders. To obtain this approval, NYSE Euronext will hold a special meeting of its shareholders on [], 2011, at which, among other business to be considered by NYSE Euronext shareholders, its shareholders will be asked to adopt the business combination agreement and approve the transactions contemplated thereby. Information about the NYSE Euronext special meeting, the combination and other business to be considered by NYSE Euronext shareholders is contained in this document, which we urge you to read. In particular, see “Risk Factors” beginning on page 31.

Your vote is very important. Whether or not you plan to attend the NYSE Euronext special meeting, please take appropriate action to make sure your NYSE Euronext shares are represented at the NYSE Euronext special meeting. Your failure to vote will have the same effect as voting against the adoption of the business combination agreement. The NYSE Euronext board of directors recommends that the NYSE Euronext shareholders vote FOR the adoption of the business combination agreement and approval of the transactions contemplated thereby and other related matters. We are not asking Deutsche Börse shareholders for a proxy and Deutsche Börse shareholders are requested not to send us a proxy.

Duncan L. Niederauer

LOGO

Chief Executive Officer

NYSE Euronext

Neither the U.S. Securities and Exchange Commission (which is referred to in this document as the “SEC”) nor any state securities commission has approved or disapproved of the securities to be issued in connection with the combination or passed upon the adequacy or accuracy of this document. Any representation to the contrary is a criminal offense.

This document is dated [], 2011, and is first being mailed to the NYSE Euronext shareholders on or about [], 2011.


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ADDITIONAL INFORMATION

This document incorporates important business and financial information about NYSE Euronext filed with or furnished to the SEC that is not included in or delivered with this document. You can obtain any of the documents filed with or furnished to the SEC by NYSE Euronext at no cost from the SEC’s website at www.sec.gov. You may also request copies of these documents, including documents incorporated by reference into this document, at no cost, by contacting NYSE Euronext. Please see “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference” for more details. In order to receive timely delivery of the documents in advance of the special meeting of NYSE Euronext shareholders or the expiration of the exchange offer, you should make your request to NYSE Euronext at 11 Wall Street, New York, New York 10005, (212) 656-3000, no later than [], 2011 or five trading days prior to the special meeting of NYSE Euronext shareholders or the expiration of the exchange offer.

No person is authorized to give any information or to make any representation with respect to the matters that this document describes other than those contained in this document, and, if given or made, the information or representation must not be relied upon as having been authorized by Deutsche Börse, NYSE Euronext or Holdco. This document does not constitute an offer to sell or a solicitation of an offer to buy securities or a solicitation of a proxy in any jurisdiction where, or to any person to whom, it is unlawful to make such an offer or a solicitation. Neither the delivery of this document nor any distribution of securities made under this document will, under any circumstances, create an implication that there has been no change in the affairs of Deutsche Börse Group, NYSE Euronext or Holdco since the date of this document or that any information contained herein is correct as of any time subsequent to the date of this document.


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LOGO

Notice of Special Meeting of Shareholders

To Be Held on [], 2011

To the Shareholders of NYSE Euronext:

A special meeting of the shareholders of NYSE Euronext will be held at 11 Wall Street, New York, New York 10005 on [], 2011 at 8:00 a.m., New York City Time. The items of business are:

 

   

to consider and vote on a proposal to adopt the business combination agreement, dated as of February 15, 2011, by and among Deutsche Börse, NYSE Euronext, Alpha Beta Netherlands Holding N.V. and Pomme Merger Corporation, and approve the transactions contemplated by the business combination agreement, pursuant to which, among other things, Deutsche Börse and NYSE Euronext each agreed to combine their businesses, through a merger and an exchange offer, and become subsidiaries of Holdco;

 

   

to consider and vote on three proposals relating to the Holdco articles of association that will be in effect after the completion of the combination;

 

   

to consider and vote on any proposal that may be made by the chairman of the NYSE Euronext board of directors to adjourn or postpone the special meeting in order to (1) solicit additional proxies with respect to the above-mentioned proposals and/or (2) hold the special meeting on a date that is on or about the date of the expiration of the offer acceptance period for the exchange offer, in the event that such date of expiration is extended; and

 

   

to transact any other business as may properly come before the NYSE Euronext special meeting or any adjournment or postponement of the NYSE Euronext special meeting.

The approval of the proposal to adopt the business combination agreement and approve the transactions contemplated by the business combination agreement requires the affirmative vote of a majority of the outstanding NYSE Euronext shares entitled to vote at the NYSE Euronext special meeting. The approval of each proposal relating to the Holdco articles of association and the proposal that may be made to adjourn or postpone the special meeting requires the affirmative vote of a majority of the NYSE Euronext shares represented and entitled to vote at the NYSE Euronext special meeting. The NYSE Euronext board of directors recommends that you vote FOR each of these proposals.

The record date for the determination of the shareholders entitled to notice of, and to vote at, the NYSE Euronext special meeting, or any adjournment or postponement of the NYSE Euronext special meeting, was the close of business on [], 2011. A list of the NYSE Euronext shareholders of record as of [], 2011 will be available for inspection during ordinary business hours at NYSE Euronext’s offices located at 11 Wall Street, New York, New York 10005, from [], 2011 up to and including the date of the NYSE Euronext special meeting.

Please remember that your shares cannot be voted unless you cast your vote by one of the following methods: (1) sign and return a proxy card; (2) call the toll-free number listed on the proxy card; (3) vote through the Internet as indicated on the proxy card; or (4) vote in person at the NYSE Euronext special meeting. You should NOT send documents representing NYSE Euronext shares with the proxy card.

Following the consummation of the combination, you will receive instructions on the conversion of your NYSE Euronext shares to Holdco shares.

By Order of the Board of Directors,

LOGO

Jan-Michiel Hessels

Chairman of the Board of Directors

New York, New York

[], 2011

YOUR VOTE IS VERY IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY, WHETHER OR NOT YOU EXPECT TO ATTEND THE NYSE EURONEXT SPECIAL MEETING. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE ENCLOSED PROXY CARD. IF YOU ARE UNCERTAIN OF HOW YOU HOLD YOUR SHARES OR NEED ASSISTANCE IN VOTING YOUR SHARES, PLEASE CONTACT MACKENZIE PARTNERS AT (800) 322-2885 (TOLL-FREE IN THE U.S.), (212) 929-5500 (CALL COLLECT), +44 (0) 203 178 8057 (LONDON OFFICE) OR VIA EMAIL TO PROXY@MACKENZIEPARTNERS.COM FOR ASSISTANCE.


Table of Contents

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT PROCEDURES FOR THE NYSE EURONEXT SPECIAL MEETING

     vii   

SUMMARY

     1   

The Companies

     1   

The Combination

     2   

The Merger

     3   

NYSE Euronext Special Meeting

     3   

Completion of the combination is conditioned on approval of each proposal relating to the Holdco articles of association

     4   

What NYSE Euronext Shareholders and Holders of NYSE Euronext Stock Options and Restricted Stock Units and Deferred Stock Units Will Receive in the Merger

     4   

What Tendering Deutsche Börse Shareholders Will Receive in the Exchange Offer

     5   

What Deutsche Börse Shareholders Will Receive if They Do Not Tender Their Deutsche Börse Shares in the Exchange Offer

     5   

How Holders of Deutsche Börse Share Options Can Participate in the Exchange Offer

     6   

What Holders of Deutsche Börse Share Options Will Receive if They Do Not Exercise Their Options and Tender the Underlying Shares in the Exchange Offer

     6   

Structure of the Combination

     6   

The Combination

     7   

After the Combination and the Post-Completion Reorganization

     7   

Reasons for the Combination

     8   

Interests of Directors, Board Members, and Executive Officers in the Combination

     8   

Opinions of Financial Advisors

     8   

Certain Material Tax Considerations

     10   

Conditions to Completion of the Combination

     10   

Appraisal Rights

     12   

Directors and Management of Holdco Following the Combination

     13   

Third-Party Acquisition Proposals

     14   

Termination of the Business Combination Agreement

     15   

Stock Exchange Listing and Stock Prices

     15   

Certain Differences in Shareholder Rights Before and After the Combination

     15   

Summary of Risk Factors

     16   

Selected Financial Information of Holdco

     20   

Selected Historical Financial Information of NYSE Euronext

     20   

Statement of Operations Data

     21   

Balance Sheet Data

     22   

Selected Historical Financial Information of Deutsche Börse Group

     23   

Holdco Selected Unaudited Pro Forma Condensed Consolidated Financial Information

     25   

Comparative Per Share Market Information and Exchange Rates

     26   

Comparative Historical and Pro Forma Per Share Data

     29   

RISK FACTORS

     31   

Risks Relating to the Combination

     31   

Risks Relating to the Businesses of Holdco, Deutsche Börse Group and NYSE Euronext

     38   

 

i


Table of Contents

Risks Relating to Regulatory Environment and Legal Risks

     52   

Risks Relating to Tax Matters

     58   

Risks Relating to Holdco Shares

     60   

RECENT DEVELOPMENTS AND OUTLOOK

     64   

Recent Developments

     64   

Outlook

     65   

GENERAL INFORMATION

     66   

Presentation of Financial Information

     66   

Forward-Looking Statements

     66   

Sources of Industry and Market Data

     67   

Exchange Rates

     67   

Certain Defined Terms

     68   

Documents Available for Inspection

     68   

THE SPECIAL MEETING OF NYSE EURONEXT SHAREHOLDERS

     70   

Time, Place and Purpose of the NYSE Euronext Special Meeting

     70   

Who Can Vote at the NYSE Euronext Special Meeting

     70   

Votes Required

     71   

Voting Limitations

     71   

Adjournments

     74   

Manner of Voting

     74   

Broker Non-Votes

     75   

Solicitation of Proxies

     76   

PROPOSAL 1: THE COMBINATION PROPOSAL

     77   

General

     77   

Interests of NYSE Euronext Directors and Executive Officers in the Combination

     78   

Interests of Deutsche Börse Supervisory and Management Board Members in the Combination

     81   

Certain Relationships and Related-Party Transactions

     83   

Accounting Treatment

     84   

Stock Exchange Listing and Stock Prices

     84   

Appraisal Rights

     85   

THE COMBINATION

     86   

Background of the Combination

     86   

Deutsche Börse’s Reasons for the Combination

     91   

NYSE Euronext’s Reasons for the Combination

     96   

Certain Synergy Forecasts

     100   

Opinion of the Financial Advisor to the NYSE Euronext Board of Directors

     102   

Opinions of the Financial Advisors to Deutsche Börse

     111   

THE BUSINESS COMBINATION AGREEMENT

     130   

Structure of the Combination

     130   

The Exchange Offer

     130   

The Merger

     131   

 

ii


Table of Contents

No Fractional Shares

     133   

Dividends and Distributions on Holdco Shares

     133   

Withholding

     133   

Post-Completion Reorganization

     133   

Conditions to Completing the Combination

     134   

Reasonable Best Efforts to Obtain Required Approvals

     137   

Third-Party Acquisition Proposals

     138   

NYSE Euronext Special Meeting; Recommendations by NYSE Euronext and Deutsche Börse Boards

     141   

Termination

     142   

Conduct of the Business Pending the Business Combination

     144   

Indemnification and Insurance of Directors and Officers

     144   

Employee Matters

     145   

Governance and Management of the Holdco Group

     146   

Amendment and Waiver

     151   

Fees and Expenses

     152   

Representations and Warranties

     152   

THE EXCHANGE OFFER

     154   

Offered Shares under the Exchange Offer, Capital Increase

     154   

Exchange Ratio, Offer Period, and Settlement of the Exchange Offer

     154   

Conditions to the Exchange Offer

     154   

Deutsche Börse’s Agreement to Tender Treasury Shares

     155   

Information on the Holdco shares offered to Deutsche Börse shareholders

     155   

Currency of the Exchange Offer

     155   

Admission to and Commencement of Trading

     155   

Settlement Agent

     155   

Interests of the Parties Participating in the Exchange Offer

     156   

Reasons for the Exchange Offer and Use of Proceeds

     156   

REGULATORY APPROVALS AND LITIGATION RELATED TO THE COMBINATION

     157   

Competition and Antitrust

     157   

Securities Regulatory Authorities

     157   

Other Countries

     160   

Stock Exchange Listings

     161   

Commitment to Obtain Approvals

     161   

General

     161   

Litigation Concerning the Combination

     161   

CAPITALIZATION

     163   

Working Capital Statement

     163   

DILUTION

     164   

HOLDCO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     165   

Holdco Unaudited Pro Forma Condensed Consolidated Income Statements

     167   

Holdco Unaudited Pro Forma Condensed Consolidated Balance Sheet

     168   

 

iii


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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     169   

BUSINESS OF HOLDCO AND CERTAIN INFORMATION ABOUT HOLDCO

     176   

Overview

     176   

Information About Holdco Following the Combination

     176   

Information About Holdco Before the Combination

     192   

Selected Historical Financial Information of Holdco

     196   

INDUSTRY AND COMPETITION

     197   

Market Overview

     197   

Competition

     198   

BUSINESS OF DEUTSCHE BÖRSE GROUP AND CERTAIN INFORMATION ABOUT DEUTSCHE BÖRSE GROUP

     201   

Overview

     201   

History and Development

     201   

Geographical Presence

     202   

Business Segments

     203   

Information Technology and Data Centers

     210   

Risk Management

     212   

Intellectual Property

     213   

Customers

     214   

Sales and Marketing

     214   

Employees

     214   

Real Property Owned, Leased or Subleased

     216   

Investments

     216   

Material Contracts

     219   

Legal Proceedings

     220   

Insurance

     222   

Certain Relationships and Related-Party Transactions

     222   

Share Capital and Shareholder Structure

     224   

Corporate Structure and List of Subsidiaries

     227   

Supervisory Board and Management Board

     229   

Number of 2010 Phantom Shares (New)

     236   

Number of Shares of Phantom Stock of the SBP Tranches 2007, 2008 and 2009 (Old)

     236   

Beneficial Ownership of Management

     239   

SELECTED HISTORICAL FINANCIAL INFORMATION OF DEUTSCHE BÖRSE GROUP

     241   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF DEUTSCHE BÖRSE GROUP

     244   

Overview

     244   

Deutsche Börse Group

     244   

BUSINESS OF NYSE EURONEXT GROUP AND CERTAIN INFORMATION ABOUT NYSE EURONEXT

     279   

History

     279   

 

iv


Table of Contents

Overview

     279   

Derivatives

     281   

Products and Services

     282   

Cash Trading and Listings

     283   

Information Services and Technology Solutions

     289   

Properties

     293   

Intellectual Property

     293   

Employees

     293   

Legal Proceedings

     294   

NYSE Euronext on Corporate Responsibility

     294   

Officers and Directors

     295   

Compensation of Directors

     297   

Compensation Discussion and Analysis

     300   

Annual Performance Bonus

     311   

Peers Who Use Equity as a Component of Bonus

     312   

2010 Compensation

     317   

2010 Summary Compensation Table

     317   

Security Ownership of Certain NYSE Euronext Beneficial Owners and Management

     329   

SELECTED HISTORICAL FINANCIAL INFORMATION OF NYSE EURONEXT

     331   

Statement of Operations Data

     331   

Balance Sheet Data

     332   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NYSE EURONEXT

     333   

Overview

     333   

Factors Affecting NYSE Euronext’s Results

     334   

Recent Acquisitions and Other Transactions

     335   

Impairment of Goodwill, Intangible Assets and Other Assets

     336   

Sources of Revenues

     337   

Components of Expenses

     339   

Results of Operations

     341   

Liquidity and Capital Resources

     350   

Summary Disclosures About Contractual Obligations

     352   

Critical Accounting Policies and Estimates

     353   

Quantitative and Qualitative Disclosures About Market Risk

     355   

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     357   

Controls and Procedures

     358   

REGULATORY AND LEGAL ENVIRONMENT

     359   

Europe

     359   

United States

     366   

DESCRIPTION OF HOLDCO SHARES

     373   

Authorized and Issued Share Capital

     373   

Ordinary Shares

     373   

 

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Authorized and Issued Share Capital

     373   

Registered Shares

     374   

Issuance of Shares

     374   

Preemption Rights

     375   

Reduction of Share Capital

     375   

Acquisition of Shares

     376   

General Meeting of Shareholders and Voting Rights

     376   

Dividends

     377   

Amendment of Articles of Association, Dissolution and Liquidation

     378   

Notices

     378   

Ownership and Voting Limits

     379   

Disclosure of Information by Holdco upon Listing

     379   

Obligations of Shareholders and Other Persons to Disclose Holdings

     383   

COMPARISON OF SHAREHOLDER RIGHTS BEFORE AND AFTER THE COMBINATION

     386   

CERTAIN MATERIAL TAX CONSIDERATIONS

     428   

PROPOSAL 2: HOLDCO ARTICLES OF ASSOCIATION PROPOSALS

     438   

PROPOSAL 3: THE SHAREHOLDER ADJOURNMENT PROPOSAL

     440   

LIMITATIONS ON ENFORCEMENT

     441   

LEGAL MATTERS

     441   

EXPERTS

     441   

WHERE YOU CAN FIND MORE INFORMATION

     441   

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     443   

Index to Consolidated Financial Statement of Alpha Beta Netherlands Holding

     FIN-1   

Index to Consolidated Financial Statement of NYSE Euronext

     FIN-8   

Index to Consolidated Financial Statement of Deutsche Börse Group

     FIN-48   

Annex A — Business Combination Agreement

  

Annex B — Opinion of Perella Weinberg Partners LP

  

Annex C — Opinion of Deutsche Bank Securities Inc.

  

Annex D — Opinion of J.P. Morgan Securities LLC

  

Annex E — Form of Articles of Association of Holdco

  

Annex F — Form of Rules for the Board of Directors of Holdco

  

Annex G — Form of Rules for the Global Executive Committee of the Holdco Group

  

 

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QUESTIONS AND ANSWERS ABOUT PROCEDURES

FOR THE NYSE EURONEXT SPECIAL MEETING

The questions and answers below highlight only selected procedural information from this document. They do not contain all of the information that may be important to you. You should read carefully this entire document, including its annexes, to fully understand the proposed transaction and the voting procedures for the NYSE Euronext special meeting.

 

Q: What is the proposed transaction for which I am being asked to vote?

 

A: NYSE Euronext shareholders are being asked to approve a proposal to adopt the business combination agreement between Deutsche Börse AG (which is referred to in this document as “Deutsche Börse” and together with its consolidated subsidiaries as “Deutsche Börse Group”) and NYSE Euronext and approve the transactions contemplated thereby. The business combination agreement provides for a combination of the businesses of Deutsche Börse Group and NYSE Euronext under a new Dutch holding company (which is referred to in this document as “Holdco”). Deutsche Börse Group’s business will be brought under Holdco through the exchange offer, and NYSE Euronext’s business will be brought under Holdco through the merger. The merger is expected to occur immediately following the completion of the exchange offer.

NYSE Euronext shareholders are also being asked to approve three proposals relating to provisions of the Holdco articles of association that will be in effect after the completion of the combination, including provisions: (1) that would require the approval by two-thirds of the votes cast (without a quorum being required) to amend the Holdco articles of association and to approve certain extraordinary transactions; (2) that would require approval by two-thirds of the votes cast (with such votes representing more than one-half of Holdco’s issued share capital) to elect directors in certain circumstances and to remove directors of Holdco; and (3) that would provide for the appointment of directors to the Holdco board of directors for an initial term expiring at the annual meeting in 2015 (or in 2016, in the case of the Holdco group chairman and Holdco group chief executive officer).

Finally, NYSE Euronext shareholders are being asked to approve any proposal that may be made by the chairman of the NYSE Euronext board of directors to adjourn or postpone the special meeting in order to (1) solicit additional proxies with respect to the above-mentioned proposals and/or (2) hold the special meeting on a date that is on or about the date of the expiration of the offer acceptance period for the exchange offer, in the event that such date of expiration is extended.

The NYSE Euronext board of directors recommends that the NYSE Euronext shareholders vote FOR each of these proposals. For a discussion of the reasons for this recommendation, see “The Combination — NYSE Euronext’s Reasons for the Combination.”

 

Q: What will I receive in the combination if I am a NYSE Euronext shareholder?

 

A: In the merger, NYSE Euronext shareholders will be entitled to receive 0.47 of one Holdco share for each of their NYSE Euronext shares.

 

Q: What will happen to my NYSE Euronext stock options and my NYSE Euronext restricted stock units or deferred stock units in the combination?

 

A: In the merger, any outstanding NYSE Euronext stock options or other NYSE Euronext stock-based awards, whether vested or unvested, will be converted into Holdco share options or Holdco share-based awards, respectively, on substantially the same terms and conditions as were applicable to such NYSE Euronext stock options and NYSE Euronext stock-based awards prior to the merger.
 

 

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The number of Holdco shares underlying each such Holdco share option or Holdco share-based award will be the number of NYSE Euronext shares underlying such award prior to the merger multiplied by 0.47 (which is the number of Holdco shares that a NYSE Euronext shareholder would have received in the merger), rounded, if necessary, down to the nearest whole Holdco share. Each Holdco share option will have an exercise price per share (rounded up to the nearest cent) equal to the per-share exercise price of the applicable NYSE Euronext stock option divided by 0.47.

All restricted stock units granted under NYSE Euronext’s Omnibus Incentive Plan or under NYSE Euronext’s 2006 Stock Incentive Plan and outstanding upon completion will, to the extent unvested, vest upon completion of the combination. However, with respect to any such restricted stock units that constitute deferred compensation within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (which is referred to in this document as the “Internal Revenue Code”), such units will still vest upon completion, but the settlement of such units will occur on the date that settlement would otherwise occur under the applicable award agreement.

NYSE Euronext restricted stock units issued after January 1, 2011 will be settled in cash.

 

Q: What will Deutsche Börse shareholders receive in the combination?

 

A: In the exchange offer, Deutsche Börse shareholders will have the right to exchange each of their Deutsche Börse shares for one Holdco share.

 

Q: What will happen to Deutsche Börse shares that are not tendered in the exchange offer?

 

A: As soon as reasonably practicable after the completion of the exchange offer and the merger, Holdco intends to effectuate a post-completion reorganization of Deutsche Börse Group that is intended to result in Deutsche Börse becoming a wholly owned or otherwise controlled subsidiary of Holdco. The post-
 

completion reorganization is intended to either eliminate any minority shareholder interest in Deutsche Börse remaining after the completion of the exchange offer or allow Holdco to control Deutsche Börse to the greatest extent legally permissible, regardless of the existence of any remaining minority shareholder interest.

Due to mandatory legal requirements to be observed in the course of any such post-completion reorganization, holders of Deutsche Börse shares who do not exchange their shares in the exchange offer may receive a different (and also a lower) amount or a different form of consideration than they would have received if they had exchanged their shares in the exchange offer. Although the parties intend to structure any post-completion reorganization in a way that such holders of Deutsche Börse shares receive the same number of Holdco shares per Deutsche Börse share(s) or consideration having the same value (without taking into account the different tax treatment or withholding requirements that may apply) that they would have received in the exchange offer if they had tendered their Deutsche Börse shares, Deutsche Börse shareholders should note that the amount or form of consideration to be offered may, therefore, nevertheless be different. Furthermore, in the event that the shares of Holdco lose value after the completion of the combination, there may be no obligation of Holdco to pay to the Deutsche Börse shareholders who did not exchange their shares the higher implied value received by the Deutsche Börse shareholders who exchanged their shares in the exchange offer.

Holdco may effectuate the post-completion reorganization by entering (directly and/or through a wholly owned subsidiary) into a domination agreement (Beherrschungsvertrag) or a combination of a domination agreement and a profit and loss transfer agreement (Gewinnabführungsvertrag) pursuant to which the remaining Deutsche Börse shareholders will have significantly limited rights, including, in the case of a profit and loss transfer agreement, a limited ability to participate in the profits of Deutsche Börse Group, in each case, pursuant to Sections 291 et seq. of the German Stock Corporation Act (Aktiengesetz) with Deutsche Börse as the controlled company and with

 

 

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Holdco shares offered to the outside Deutsche Börse shareholders as consideration (Abfindung) pursuant to Section 305 para. 2 of the German Stock Corporation Act.

In the event that Holdco holds, directly or indirectly, 95% or more of the outstanding Deutsche Börse shares after the completion of the exchange offer or at any time thereafter Holdco may also effectuate the post-completion reorganization by commencing a mandatory buy-out of the Deutsche Börse shares from any remaining shareholders by way of a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act for cash or by applying for a court order in accordance with Sections 39a et seq. of the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz) (which is referred to in this document as the “German Takeover Act”) (in this case Holdco will be required to offer both cash and Holdco shares as consideration), in each case alternatively or in addition to entering into a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement.

In the event that in the future, under a new German legislation called Third Amendment of the Act on Corporate Reorganisations (Drittes Gesetz zur Änderung des Umwandlungsgesetzes) which is currently being prepared, a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act may be performed, under certain circumstances, by a shareholder holding a participation of at least 90% (instead of at least 95%) of the outstanding Deutsche Börse shares, Holdco may also decide to commence such a squeeze-out transaction if it holds, directly or indirectly, 90% or more of the outstanding Deutsche Börse shares after the completion of the exchange offer or any time thereafter.

 

Q: What will happen to Deutsche Börse share options following the exchange offer?

 

A: The exchange offer does not extend to Deutsche Börse share options. Holders of exercisable Deutsche Börse share options who want to tender the underlying Deutsche Börse shares
 

into the exchange offer must first exercise such options and then tender the underlying Deutsche Börse shares in the exchange offer prior to the expiration of the offer acceptance period and the subsequent offering period of the exchange offer. The exchange offer does not extend to Deutsche Börse share options. Deutsche Börse share options issued after January 1, 2011, however, will be settled in cash.

 

Q: How do I vote if I am a NYSE Euronext shareholder?

 

A: NYSE Euronext shareholders can vote by telephone, through the Internet or by returning their signed and dated proxy card by mail. Alternatively, they may vote in person at the NYSE Euronext special meeting by ballot.

If a NYSE Euronext shareholder holds NYSE Euronext shares in its own name, it may vote by telephone or through the Internet by following the instructions on the accompanying proxy card. If the NYSE Euronext shares are registered in the name of a broker, bank or other nominee (which is also known as being held in “street name”), that broker, bank or other nominee has enclosed or will provide a voting instruction card for the NYSE Euronext shareholder to direct the broker, bank or other nominee how to vote its shares.

NYSE Euronext shareholders who hold shares in “street name” must return their instructions to their broker, bank or other nominee on how to vote their shares. If a NYSE Euronext shareholder that holds shares in “street name” desires to attend the NYSE Euronext special meeting, the NYSE Euronext shareholder should bring a letter from its broker, bank or other nominee identifying the NYSE Euronext shareholder as the beneficial owner of such shares and authorizing the NYSE Euronext shareholder to vote.

You should be aware that, as of March 1, 2011, NYSE Euronext directors and executive officers and their affiliates owned and were entitled to vote approximately 0.3% of the outstanding NYSE Euronext shares entitled to vote at the NYSE Euronext special meeting.

 

 

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The NYSE Euronext certificate of incorporation and bylaws contain certain voting limitations for NYSE Euronext shareholders. A description of these voting limitations is set forth under “The Special Meeting of NYSE Euronext Shareholders — Voting Limitations.”

 

Q: If I am a NYSE Euronext shareholder, what happens if I do not vote or if I abstain from voting?

 

A: Adoption of the business combination agreement and approval of the transactions contemplated thereby by NYSE Euronext shareholders requires the affirmative vote of a majority of the NYSE Euronext shares outstanding and entitled to vote at the NYSE Euronext special meeting. As a result, if you are a NYSE Euronext shareholder and do not vote or abstain from voting your NYSE Euronext shares, this will have the same effect as voting against the adoption of the business combination agreement. Likewise, broker non-votes and abstentions will have the same effect as a vote against the proposal to adopt the business combination agreement.

Approval of the proposals relating to the Holdco articles of association, as well as approval of any proposal to postpone or adjourn the NYSE Euronext special meeting in order to solicit additional proxies and/or hold the special meeting on a date that is on or about the date of the expiration of the offer acceptance period for the exchange offer, requires the affirmative vote of a majority of the votes cast for or against the proposals at the NYSE Euronext special meeting by NYSE Euronext shareholders entitled to vote on the proposals. An abstention from voting on these proposals will be treated as “present” for purposes of establishing a quorum. However, since an abstention is not treated as a “vote” for or against the proposal, it will have no effect on the outcome of the vote. If you fail to vote on such proposals, your NYSE Euronext shares will not be counted as present and, therefore, will not affect the adoption of such proposal except to the extent that such failure to vote prevents a quorum from being present.

Completion of the combination is conditioned on approval of each proposal relating to the Holdco articles of association. As a result, a vote against any of the proposals regarding the Holdco articles of association effectively will be a vote against adoption of the business combination agreement.

 

Q: If I am a NYSE Euronext shareholder and my NYSE Euronext shares are held in “street name” by a broker, bank or other nominee, will my broker or bank vote my shares for me?

 

A: If you hold your NYSE Euronext shares in “street name” and do not provide voting instructions to your broker, your NYSE Euronext shares will not be voted on any proposal on which your broker does not have discretionary authority to vote. Generally, your broker, bank or other nominee does not have discretionary authority to vote on the proposal relating to the adoption of the business combination agreement, the proposals relating to the Holdco articles of association or the proposal to postpone or adjourn the NYSE special meeting. Accordingly, your broker, bank or other nominee will vote your shares held by it in “street name” only if you provide voting instructions. You should follow the procedures that your broker, bank or other nominee provides. Shares that are not voted because you do not properly instruct your broker, bank or other nominee will have the effect of votes against the adoption of the business combination agreement.

Alternatively, you can attend the NYSE Euronext special meeting and vote in person by bringing a letter from your broker, bank or other nominee identifying you as the beneficial owner of such NYSE Euronext shares, confirming that such shares have not otherwise been voted and will not be voted via proxy, and authorizing you to vote the shares or specifying how such shares had been voted.

 

 

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Q: Can I change my vote after I have delivered my proxy?

 

A: Yes. If you are a NYSE Euronext shareholder of record, there are three ways to change your vote after you have submitted a proxy:

 

   

you may send a later-dated, signed proxy card to the address indicated on the proxy card, which must be received prior to the NYSE Euronext special meeting;

 

   

you may attend the NYSE Euronext special meeting in person and vote; or

 

   

you may send a notice of revocation to the agent for NYSE Euronext, which notice must be received prior to the NYSE Euronext special meeting.

Simply attending the NYSE Euronext special meeting without voting will not revoke your proxy. NYSE Euronext proxy cards can be sent by mail to MacKenzie Partners, Inc., 105 Madison Avenue, New York, New York 10016.

If your NYSE Euronext shares are held in an account at a broker, bank or other nominee and you have instructed your broker, bank or other nominee on how to vote your shares, you should follow the instructions provided by your broker, bank or other nominee to change your vote.

Q: When and where is the NYSE Euronext special meeting?

 

A: The NYSE Euronext special meeting will take place on [], 2011 at 11 Wall Street, New York, New York 10005 at 8:00 a.m. New York City time.

 

Q: Who can help answer my questions?

 

A: If you are a NYSE Euronext shareholder and have any questions about the combination, the post-completion reorganization or how to submit your proxy, or if you need additional copies of this document or the enclosed proxy card, you should contact:

LOGO

105 Madison Avenue

New York, New York 10016

(212) 929-5500 (Call Collect)

Call Toll-Free (800) 322-2885

+44 (0) 203 178 8057 (London Office)

or

Email: proxy@mackenziepartners.com

 

 

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SUMMARY

This summary highlights selected information in this document and may not contain all of the information that is important to you. You should carefully read this entire document, including its Annexes for a more complete understanding of the business combination agreement, the transactions contemplated by the business combination agreement, Deutsche Börse Group, NYSE Euronext and Holdco.

 

The Companies

Holdco

Alpha Beta Netherlands Holding N.V. (which is referred to in this document as “Holdco”) is a newly incorporated public limited liability company (naamloze vennootschap) formed under the laws of the Netherlands that will become the parent company of Deutsche Börse and NYSE Euronext upon the completion of the combination. To date, Holdco has not conducted any material activities other than those incident to its formation and the matters contemplated by the business combination agreement. The address of Holdco’s principal executive offices is Beursplein 5, 1012 JW Amsterdam, the Netherlands. Its telephone number is +31 (0) 20 550-4444. Prior to the completion of the combination, the name of Holdco will be changed to a name to be agreed between NYSE Euronext and Deutsche Börse.

Deutsche Börse Group

Deutsche Börse was originally formed on August 1, 1990 under the name “Frankfurter Wertpapierbörse AG.” In December 1992, it changed its name to “Deutsche Börse Aktiengesellschaft.” In 1993, a system for electronically consolidating order routing, price determination and processing, was implemented across Germany, thereby giving full electronic support, for the first time, to floor trading on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse). Its electronic trading platform Xetra was subsequently launched in November 1997. In the following year, in June 1998, the derivatives exchange Eurex was established as a joint venture between DTB Deutsche Terminbörse and Swiss Soffex. Subsequently, in January 2000, Deutsche Börse Clearing AG and Cedel International S.A. merged to form Clearstream International S.A., a company incorporated under the laws of Luxembourg, which, together with its subsidiaries, handles Deutsche Börse Group’s securities post-trade

services. In connection with its initial public offering in February 2001, Deutsche Börse shares were admitted to trading on the Frankfurt Stock Exchange. Following its capital increase in June 2002, Deutsche Börse acquired all shares of Clearstream International S.A., which has since then been integrated into Deutsche Börse Group. Deutsche Börse shares were included in the DAX index as of December 2002 and in the Euro Stoxx 50 index as of October 2007. In 2007, Eurex completed the acquisition of the U.S. options exchange International Securities Exchange Holdings, Inc. (which is referred to in this document as “ISE”) creating the largest transatlantic marketplace for derivatives. In order to strengthen its position in the international index business Deutsche Börse raised its equity investment in index provider STOXX Ltd. from 33% to 50% in December 2009.

As one of the largest exchange organizations worldwide, Deutsche Börse Group offers its customers a broad portfolio of products and services. These cover the entire process chain of financial market transactions, including trading and clearing of securities, including derivatives, through transaction settlement, custody and collateral management of securities and providing market information, down to the development and operation of electronic systems.

Deutsche Börse Group’s business activities are currently divided into four segments: Xetra, Eurex, Clearstream and Market Data & Analytics.

As of December 31, 2010, Deutsche Börse Group employed 3,490 people in 19 locations in 15 countries. In 2010, based on financial statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (which is referred to in this document as “IFRS”), Deutsche Börse generated revenues on a consolidated basis of €2,226.7 million and earnings before interest and tax of €527.8 million.

 

 

 

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The address of Deutsche Börse’s principal office is Mergenthalerallee 61, 65760 Eschborn, Germany, and its telephone number is +49 (0) 69 2 11 0. Its website is www.deutsche-boerse.com. Information contained on Deutsche Börse Group’s website does not constitute part of this document. This website address is an inactive text reference and is not intended to be an actual link to the website.

NYSE Euronext

NYSE Euronext, a Delaware corporation, was organized on May 22, 2006 in anticipation of the combination of the businesses of NYSE Group, Inc., a Delaware corporation, and Euronext N.V., a company organized under the laws of the Netherlands. The combination was consummated on April 4, 2007. NYSE Group, Inc. was formed in connection with the March 7, 2006 merger between New York Stock Exchange, Inc., a New York Type A not-for-profit corporation, and Archipelago Holdings, Inc., a Delaware corporation. Euronext was the first cross-border exchange group, created with the 2000 merger of the Paris, Amsterdam and Brussels stock exchanges. The New York Stock Exchange traces its origins to the Buttonwood Agreement, signed in 1792 by a group of 24 traders gathered under a buttonwood tree in lower Manhattan. In 1817, the traders formed the New York Stock & Exchange Board, which in 1863 was renamed the New York Stock Exchange. The Amsterdam Stock Exchange, Euronext’s oldest constituent and the world’s first stock exchange, originated in 1602 in conjunction with a stock issuance by the Dutch East India Company.

NYSE Euronext is a leading global operator of financial markets and provider of innovative trading strategies. NYSE Euronext offers a broad and growing array of products and services in cash equities, futures, options, swaps, exchange-traded products, bonds, carbon trading, clearing operations, market data and commercial technology solutions, all designed to meet the evolving needs of issuers, investors, financial institutions and market participants. NYSE Euronext has three reportable business segments: Derivatives, Cash Trading & Listings, and Information Services & Technology Solutions.

As of December 31, 2010, NYSE Euronext employed 2,968 full-time equivalent employees. For the year ended December 31, 2010, based on financial statements prepared in accordance with U.S. generally accepted accounting principles (which is referred to in this document as “U.S. GAAP”), NYSE Euronext generated $4,425 million in revenues and $745 million in operating income from continuing operations.

NYSE Euronext’s principal executive office is located at 11 Wall Street, New York, New York 10005. Its telephone number is (212) 656-3000. Its European headquarters are located at 39 rue Cambon, 75039 Paris, France, and its telephone number is +33 1 49 27 10 00. Its website is www.nyse.com. Information contained on NYSE Euronext’s website does not constitute a part of this document. This website address is an inactive text reference and is not intended to be an actual link to the website.

The Combination

Pursuant to the business combination agreement, Deutsche Börse and NYSE Euronext have agreed to combine their businesses under a new Dutch holding company. The effect of the combination will be that Deutsche Börse and NYSE Euronext will become subsidiaries of Holdco. Deutsche Börse will become a subsidiary of Holdco through an exchange offer of Holdco shares for Deutsche Börse shares, and NYSE Euronext will become a subsidiary of Holdco through a merger of a wholly owned subsidiary of Holdco with and into NYSE Euronext.

Following the exchange offer, and depending on the percentage of Deutsche Börse shares acquired by Holdco in the exchange offer, Deutsche Börse and Holdco intend to complete a post-completion reorganization. Holdco will enter into (1) a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement (either directly or through a wholly owned subsidiary), pursuant to which the remaining shareholders of Deutsche Börse will have limited rights, including a limited ability to participate in the profits of Deutsche Börse Group. As a result, in case of a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement, Deutsche Börse shareholders who did not

 

 

 

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tender their shares in the exchange offer may elect to either (x) continue to hold their Deutsche Börse shares and be entitled to a variable or fixed guaranteed minimum dividend (in the case of a domination agreement) or a variable or fixed annual cash compensation (in the case of a combination of a domination agreement and a profit and loss transfer agreement) or (y) to exchange their Deutsche Börse shares for Holdco shares and/or (2) a mandatory buy-out of the Deutsche Börse shares from any remaining holders thereof by way of a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act (Aktiengesetz) or by applying for a court order in accordance with Sections 39a et seq. of the German Takeover Act., as the result of which Deutsche Börse shareholders who did not tender their shares in the exchange offer will be excluded against payment of a compensation.

The Merger

The parties to the business combination agreement have agreed that, immediately after the time that Holdco accepts for exchange, and exchanges, the Deutsche Börse shares that are validly tendered and not withdrawn in the exchange offer, Pomme Merger Corporation, a wholly owned subsidiary of Holdco, will merge with and into NYSE Euronext, as a result of which NYSE Euronext will become a wholly owned subsidiary of Holdco.

In the merger, each outstanding NYSE Euronext share will be converted into the right to receive 0.47 of a fully paid and non-assessable Holdco share. Upon completion of the merger, the surviving corporation will be NYSE Euronext, which will be a wholly owned subsidiary of Holdco. This 0.47 exchange ratio for the merger is fixed and will not be adjusted to reflect stock price changes prior to the completion of the merger.

At the effective time of the merger, each outstanding option to purchase NYSE Euronext shares granted under the employee or director stock plans of NYSE Euronext, whether or not vested, will be converted into an option to acquire shares of Holdco on substantially the same terms and conditions as were applicable to it prior to such conversion, except that (1) each converted stock option will be exercisable for the number of Holdco

shares equal to the number of NYSE Euronext shares that it was exercisable for prior to conversion multiplied by 0.47, and (2) the per-share exercise price for the Holdco share option will be equal to the per-share exercise price that was applicable prior to its conversion divided by 0.47.

NYSE Euronext Special Meeting

To effect the merger, a special meeting of NYSE Euronext shareholders will be held at 11 Wall Street, New York, New York 10005, on [], starting at 8:00 a.m. New York City time. NYSE Euronext shareholders are entitled to notice of, and to vote at, the NYSE Euronext special meeting if they owned NYSE Euronext shares at the close of business on [], 2011, which is the record date for the special meeting. As of [], 2011 there were [] NYSE Euronext shares issued and outstanding, of which [] shares were entitled to vote at the NYSE Euronext special meeting. As of [], 2011, NYSE Euronext directors and executive officers and their affiliates owned and were entitled to vote approximately []% of the outstanding NYSE Euronext shares entitled to vote at the NYSE Euronext special meeting.

At the NYSE Euronext special meeting, NYSE Euronext shareholders will be asked to consider and vote on:

 

   

a proposal to adopt the business combination agreement and approve the transactions contemplated by the business combination agreement;

 

   

three proposals relating to the Holdco articles of association that will be in effect after completion of the combination:

 

   

a proposal to include provisions in the Holdco articles of association requiring approval by two-thirds of the votes cast by Holdco shareholders, without a quorum being required, to amend the Holdco articles of association and to approve certain extraordinary transactions;

 

   

a proposal to include provisions in the Holdco articles of association requiring approval by two-thirds of the votes cast by the Holdco

 

 

 

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shareholders, with such votes representing more than one-half of Holdco’s issued share capital, to elect directors in certain circumstances and to remove directors of Holdco; and

 

   

a proposal to include provisions in the Holdco articles of association providing for the appointment of directors to the Holdco board of directors for an initial term expiring at the annual meeting in 2015 (or in 2016 in the case of the Holdco group chairman and Holdco group chief executive); and

 

   

any proposal that may be made by the chairman of the NYSE Euronext board of directors to adjourn or postpone the special meeting in order to (1) solicit additional proxies with respect to the above-mentioned proposals and/or (2) hold the special meeting on a date that is on or about the date of the expiration of the offer acceptance period for the exchange offer, in the event that such date of expiration is extended.

Each NYSE Euronext share is entitled to one vote on each proposal at the NYSE Euronext special meeting, subject to the voting limitations described below. The affirmative vote of the holders of a majority of the NYSE Euronext shares outstanding and entitled to vote at the NYSE Euronext special meeting as of the record date is required for the adoption of the business combination agreement and approval of the transactions contemplated by the business combination agreement. The affirmative vote of the holders of a majority of the NYSE Euronext shares represented and entitled to vote at the NYSE Euronext special meeting is required for the approval of the three proposals relating to the Holdco articles of association and any proposal to postpone or adjourn the NYSE Euronext special meeting.

Completion of the combination is conditioned on approval of each proposal relating to the Holdco articles of association.

The holders of record of a majority of the total number of outstanding NYSE Euronext shares

entitled to vote, represented either in person or by proxy, will constitute a quorum at the NYSE Euronext special meeting.

What NYSE Euronext Shareholders and Holders of NYSE Euronext Stock Options and Restricted Stock Units and Deferred Stock Units Will Receive in the Merger

In the merger, each NYSE Euronext share will entitle its holder to receive 0.47 of one share of Holdco.

In the merger, any outstanding NYSE Euronext stock options or other NYSE Euronext stock-based awards, whether vested or unvested, will be converted into Holdco share options or Holdco share-based awards, respectively, on substantially the same terms and conditions as were applicable to such NYSE Euronext stock options and NYSE Euronext stock-based awards prior to the merger.

The number of Holdco shares underlying each such Holdco share option or Holdco share-based award will be the number of NYSE Euronext shares underlying such award prior to the merger multiplied by 0.47 (which is the number of Holdco shares that a NYSE Euronext shareholder would have received in the merger), rounded, if necessary, down to the nearest whole Holdco share. Each Holdco share option will have an exercise price per share (rounded up to the nearest cent) equal to the per-share exercise price of the applicable NYSE Euronext stock option divided by 0.47.

All restricted stock units granted under NYSE Euronext’s Omnibus Incentive Plan or under NYSE Euronext’s 2006 Stock Incentive Plan and outstanding upon completion will, to the extent unvested, vest upon completion. However, with respect to any such restricted stock units that constitute deferred compensation within the meaning of Section 409A of the Internal Revenue Code such units will still vest upon completion, but the settlement of such units will occur on the date that settlement would otherwise occur under the applicable award agreement.

NYSE Euronext restricted stock units issued after January 1, 2011 will be settled in cash.

 

 

 

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What Tendering Deutsche Börse Shareholders Will Receive in the Exchange Offer

In the exchange offer, Holdco will offer to acquire each outstanding Deutsche Börse share for one Holdco share.

Assuming that all of the outstanding Deutsche Börse shares are exchanged in the exchange offer, the aggregate number of Holdco shares issued in the combination to the Deutsche Börse shareholders will equal approximately 60% of the Holdco shares outstanding at the time of completion of the combination.

Holdco is not obligated to acquire any tendered Deutsche Börse shares unless at the time of expiration of the offer acceptance period, the sum of (i) Deutsche Börse shares that have been validly tendered and not withdrawn and (ii) Deutsche Börse shares that Holdco already holds or has acquired equals at least 75% of the sum of (x) Deutsche Börse shares issued as of the expiration of the offer acceptance period and (y) the number of all Deutsche Börse shares that Deutsche Börse may issue after the publication of the exchange offer document pursuant to existing obligations (e.g. in the event of options being exercised). Deutsche Börse has agreed to tender all of the Deutsche Börse shares held in treasury by Deutsche Börse. As of March 31, 2011, 8,956,977 Deutsche Börse shares were held by Deutsche Börse as treasury shares.

What Deutsche Börse Shareholders Will Receive if They Do Not Tender Their Deutsche Börse Shares in the Exchange Offer

As soon as reasonably practicable after the completion of the exchange offer and the merger, Holdco intends to effectuate a post-completion reorganization of Deutsche Börse Group that is intended to result in Deutsche Börse becoming a wholly owned or otherwise controlled subsidiary of Holdco. The post-completion reorganization is intended to either eliminate any minority shareholder interest in Deutsche Börse remaining after the completion of the exchange offer or allow Holdco to control Deutsche Börse to the greatest extent legally permissible, regardless of the existence of any remaining minority shareholder interest.

Due to mandatory legal requirements to be observed in the course of any such post-completion reorganization, holders of Deutsche Börse shares who do not exchange their shares in the exchange offer may receive a different (and also a lower) amount or a different form of consideration than they would have received if they had exchanged their shares in the exchange offer. Although the parties of the Business Combination Agreement intend to structure any post-completion reorganization in a way that such holders of Deutsche Börse shares receive the same number of Holdco shares per Deutsche Börse share(s) or consideration having the same value (without taking into account the different tax treatment or withholding requirements that may apply) that they would have received in the exchange offer if they had tendered their Deutsche Börse shares, Deutsche Börse shareholders should note that the amount or form of consideration to be offered may, therefore, nevertheless be different. Furthermore, in the event that the shares of Holdco lose value after the completion of the combination, there may be no obligation of Holdco to pay to the Deutsche Börse shareholders who did not exchange their shares the higher implied value received by the Deutsche Börse shareholders who exchanged their shares in the exchange offer.

Holdco may effectuate the post-completion reorganization by entering (directly and/or through a wholly owned subsidiary) into a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement pursuant to which the remaining Deutsche Börse shareholders will have significantly limited rights, including, in the case of a profit and loss transfer agreement, a limited ability to participate in the profits of Deutsche Börse Group, in each case, pursuant to Sections 291 et seq. of the German Stock Corporation Act with Deutsche Börse as the controlled company and with Holdco shares offered to the outside Deutsche Börse shareholders as consideration pursuant to Section 305 para. 2 of the German Stock Corporation Act.

In the event that Holdco holds, directly or indirectly, 95% or more of the outstanding Deutsche Börse shares after the completion of the exchange offer or at any time thereafter Holdco may also effectuate the post-completion reorganization by commencing a

 

 

 

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mandatory buy-out of the Deutsche Börse shares from any remaining shareholders by way of a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act for cash or by applying for a court order in accordance with Sections 39a et seq. of the German Securities Takeover Act (in this case Holdco will be required to offer both cash and Holdco shares as consideration), in each case in addition to entering into a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement.

In the event that in the future, under a new German legislation called Third Amendment of the Act on Corporate Reorganisations (Drittes Gesetz zur Änderung des Umwandlungsgesetzes) which is currently being prepared, a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act may be performed, under certain circumstances, by a shareholder holding a participation of at least 90% (instead of at least 95%) of the outstanding Deutsche Börse shares, Holdco may also decide to commence such a squeeze-out transaction if it holds, directly or indirectly, 90% or more of the outstanding Deutsche Börse shares after the completion of the exchange offer or any time thereafter.

For further details regarding the post-completion reorganization, see “The Business Combination Agreement — Post-Completion Reorganization.”

How Holders of Deutsche Börse Share Options Can Participate in the Exchange Offer

The exchange offer does not extend to Deutsche Börse share options. Holders of exercisable Deutsche Börse share options who want to tender the underlying Deutsche Börse shares into the exchange offer must first exercise such options and then tender the underlying Deutsche Börse shares in the exchange offer prior to the expiration of the offer acceptance period and the subsequent offering period of the exchange offer. For further details regarding the procedure for participating in the exchange offer, see “The Business Combination Agreement — Treatment of Deutsche Börse Share Options.”

What Holders of Deutsche Börse Share Options Will Receive if They Do Not Exercise Their Options and Tender the Underlying Shares in the Exchange Offer

If, following the completion of the exchange offer, there are still Deutsche Börse share options outstanding, a conversion mechanism will be implemented for purposes of converting such options into Holdco share options on substantially the same terms and conditions as currently applicable, subject to specific arrangements being made available to certain holders in order to protect such holders’ tax and social security treatment. Deutsche Börse share options issued after January 1, 2011, however, will be settled in cash.

Structure of the Combination

In the combination, Deutsche Börse Group’s business will be brought under Holdco through the exchange offer, and NYSE Euronext’s business will be brought under Holdco through the merger. As soon as possible after the completion of the exchange offer and the merger, Holdco intends to effectuate the post-completion reorganization. Holdco intends to effectuate one or more corporate reorganization transactions, which may include entering (directly and/or through a wholly owned subsidiary) into a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement. In the event that Holdco holds, directly or indirectly, 95% or more of the outstanding Deutsche Börse shares after the completion of the exchange offer or any time thereafter, Holdco may also effectuate the post-completion reorganization by commencing a mandatory buy-out of the Deutsche Börse shares from any remaining shareholders thereof.

In the event that in the future, under a new German legislation which is currently being prepared, such mandatory buy-out becomes available, under certain circumstances, also for a shareholder holding less than 95% of the outstanding Deutsche Börse shares, Holdco may also decide to perform a mandatory buy-out if, after completion of the exchange offer or any time thereafter, the relevant prerequisites are met without holding, directly or indirectly, 95% or more of the outstanding Deutsche Börse shares.

 

 

 

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The following diagram illustrates the structure of the combination and assumes that Holdco effects the post-completion reorganization by way of a domination agreement:

The Combination

LOGO

After the Combination and the Post-Completion Reorganization

LOGO

 

 

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Reasons for the Combination

Deutsche Börse Shareholders

Based on Deutsche Börse’s reasons for the combination, the Deutsche Börse management board and the Deutsche Börse supervisory board approved the business combination agreement and will recommend, subject to their duties under applicable law, that the Deutsche Börse shareholders tender their Deutsche Börse shares in the exchange offer.

NYSE Euronext Shareholders

Based on NYSE Euronext’s reasons for the combination, the NYSE Euronext board of directors approved the business combination agreement and have recommended that the NYSE Euronext shareholders vote FOR the adoption of the business combination agreement and the approval of the transactions contemplated by the business combination agreement.

Interests of Directors, Board Members, and Executive Officers in the Combination

Shareholders of Deutsche Börse and shareholders of NYSE Euronext should be aware that some of the Deutsche Börse management board members, Deutsche Börse supervisory board members and directors and executive officers of NYSE Euronext may have interests in the combination that are different from, or in addition to, the interests of the Deutsche Börse shareholders and NYSE Euronext shareholders. These interests may include, but are not limited to, the continued employment of certain Deutsche Börse management board members and executive officers of NYSE Euronext, the continued positions of certain Deutsche Börse supervisory board members and certain directors of NYSE Euronext as directors of Holdco and the indemnification of former Deutsche Börse management and supervisory board members and directors and executive officers of NYSE Euronext by Holdco. These interests also include the treatment in the combination of restricted stock units, stock options and other rights held by these directors, board members and executive officers. As of March 14, 2011, members of the Deutsche Börse management board and the Deutsche Börse supervisory board owned 50,780 Deutsche Börse shares in the aggregate.

Shareholders of Deutsche Börse and shareholders of NYSE Euronext should be aware that, as of March 1, 2011, NYSE Euronext directors and executive officers and their affiliates owned and were entitled to vote approximately 0.3% of the outstanding NYSE Euronext shares entitled to vote at the NYSE Euronext special meeting.

Opinions of Financial Advisors

Opinion of the Financial Advisor to the NYSE Euronext Board of Directors

Perella Weinberg Partners LP, or Perella Weinberg, rendered its oral opinion, subsequently confirmed in writing, to the NYSE Euronext Board of Directors that, on February 15, 2011, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth in the opinion, the merger exchange ratio in the combination was fair, from a financial point of view, to holders of NYSE Euronext shares (other than Deutsche Börse or any affiliate of Deutsche Börse).

The full text of Perella Weinberg’s written opinion, dated February 15, 2011, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by Perella Weinberg, is attached as Annex B and is incorporated by reference herein. Holders of NYSE Euronext shares are urged to read Perella Weinberg’s opinion carefully and in its entirety. The opinion does not address NYSE Euronext’s underlying business decision to enter into the combination or the relative merits of the combination as compared with any other strategic alternative that may have been available to NYSE Euronext. The opinion does not constitute a recommendation to any holder of NYSE Euronext shares or Deutsche Börse shares as to how such holders should vote or otherwise act with respect to the combination or any other matter and does not in any manner address the prices at which NYSE Euronext shares, Holdco shares or Deutsche Börse shares will trade at any time. In addition, Perella Weinberg expressed no opinion as to the fairness of the combination to, or any consideration to, the holders of any other class of securities, creditors or

 

 

 

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other constituencies of NYSE Euronext. Perella Weinberg provided its opinion for the information and assistance of the NYSE Euronext board of directors in connection with, and for the purposes of its evaluation of, the combination. This summary is qualified in its entirety by reference to the full text of the opinion.

Opinions of the Financial Advisors to Deutsche Börse

Opinion of Deutsche Bank Securities Inc. as Deutsche Börse’s Financial Advisor

On February 15, 2011, Deutsche Bank Securities Inc. (which is referred to in this document as “DBSI”), delivered its opinion at a meeting of the Deutsche Börse supervisory board, at which all members of the Deutsche Börse management board were present, that as of the date of the opinion and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations described in the opinion, the exchange ratio of one Holdco share for each Deutsche Börse share tendered by Deutsche Börse shareholders (which is referred to in this document as the “Deutsche Börse exchange ratio”) pursuant to the exchange offer was fair, from a financial point of view, to the holders of Deutsche Börse shares.

The full text of the written opinion of DBSI, dated February 15, 2011, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by DBSI in rendering its opinion, is included as Annex C to this document. Deutsche Börse encourages its shareholders to read the opinion carefully in its entirety. The DBSI opinion does not express an opinion or recommendation as to whether any holder of Deutsche Börse shares should tender any Deutsche Börse shares in connection with the exchange offer. The DBSI opinion also does not address the fairness of the combination, or any consideration received in connection therewith, to the holders of any class of securities, creditors or other constituencies of Deutsche Börse or NYSE Euronext (other than the fairness, from a financial point of view of the Deutsche Börse exchange ratio to the holders of Deutsche Börse shares), nor does it address the

fairness of the contemplated benefits of the combination. Neither DBSI’s opinion, nor the summary thereof or of DBSI’s financial analyses set forth in this document is being provided for the use of any holders of NYSE Euronext shares and does not constitute a recommendation as to how any holder of NYSE Euronext shares should vote with respect to the merger, the other aspects of the combination or any other matter. The summary of the DBSI opinion set forth in this exchange offer is qualified in its entirety by reference to the full text of the opinion included as Annex C.

Opinion of J.P. Morgan as Deutsche Börse’s Financial Advisor

J.P. Morgan Securities LLC., which is referred to as J.P. Morgan, delivered its opinion to the management board and the supervisory board of Deutsche Börse that, as of the date of the fairness opinion and based upon and subject to the various factors, assumptions and limitations set forth therein, the exchange ratio in the proposed exchange offer was fair, from a financial point of view, to the holders of Deutsche Börse shares (other than Deutsche Börse).

The full text of the written opinion of J.P. Morgan, dated February 15, 2011, which sets forth, among other things, assumptions made, procedures followed, matters considered and limitations on the review undertaken in rendering its opinion, is attached as Annex D to this document and is incorporated herein by reference. J.P. Morgan provided its opinion for the information and assistance of the management board and the supervisory board of Deutsche Börse in connection with their consideration of the proposed combination. The J.P. Morgan opinion is addressed to the management board and the supervisory board of Deutsche Börse and does not constitute a recommendation to any holder of Deutsche Börse shares as to whether such holder should tender its Deutsche Börse shares in the exchange offer or how such holder should vote with respect to the combination or any other matter if such vote is required. The opinion and advice provided by J.P. Morgan is not and should not be considered a value opinion as is customarily rendered by qualified auditors based on the requirements of German corporate law

 

 

 

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(e.g., in connection with a mandatory buy-out of Deutsche Börse shares or entering into a domination agreement and/or a profit and loss transfer agreement), nor has J.P. Morgan expressed any opinion as to the compensation which may be payable to holders of Deutsche Börse shares in connection with such a mandatory buy-out of their Deutsche Börse shares or in connection with entering into a domination agreement and/or a profit and loss transfer agreement. Neither J.P. Morgan’s opinion, nor the summary thereof or of J.P. Morgan’s financial analyses set forth in this document is being provided for the use of any holders of NYSE Euronext shares and does not constitute a recommendation as to how any holder of NYSE Euronext shares should vote with respect to the merger, the other aspects of the combination or any other matter.

Certain Material Tax Considerations

Holders of Deutsche Börse shares and NYSE Euronext shares should read “Certain Material Tax Considerations” for a discussion of certain material tax consequences of the exchange offer to holders of Deutsche Börse shares and the merger to holders of NYSE Euronext shares, as applicable. Holders of Deutsche Börse shares and NYSE Euronext shares should consult their own tax advisors to determine the tax consequences to them (including the application and effect of any state, local or non-U.S. income and other tax laws) of the exchange offer and the merger.

Conditions to Completion of the Combination

The completion of the combination is subject to the satisfaction of a number of conditions. Pursuant to the business combination agreement, NYSE Euronext’s obligation to complete the merger is subject to the completion of the exchange offer and acquisition by Holdco of all of the Deutsche Börse shares validly tendered and not withdrawn in the exchange offer. In turn, the completion of the exchange offer is subject to the satisfaction (or waiver by both NYSE Euronext or Deutsche Börse, to the extent waiver is permitted by the German Takeover Act and other applicable laws) of the

conditions set forth in the business combination agreement. Those conditions include the following:

Mutual Conditions:

 

   

shares representing at least 75% of the Deutsche Börse shares outstanding, on a fully diluted basis, must be validly tendered and not withdrawn in the exchange offer;

 

   

expiration of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and Council Regulation (EC) 139/2004 of the European Community must have occurred;

 

   

effectiveness of the registration statement of which this document forms a part for issuing shares in the United States must have occurred;

 

   

adoption of the business combination agreement and approval of certain provisions of the Holdco articles of association at the NYSE Euronext special meeting must have occurred;

 

   

authorization for listing on the New York Stock Exchange, the Frankfurt Stock Exchange and Euronext Paris, upon official notice of issuance must have been granted;

 

   

no suit, action or proceeding by any governmental entity seeing to enjoin or prohibit the combination must be pending;

 

   

no material adverse market change must have occurred; and

 

   

certain additional governmental approvals must have been obtained.

Conditions Waivable by NYSE Euronext:

 

   

prior to the expiration of the acceptance period, there must not have occurred an “offer material adverse effect” on Deutsche Börse; and

 

   

NYSE Euronext must have received private letter rulings from the IRS and/or opinions of counsel regarding the tax treatment of the merger (and/or the merger and the exchange offer taken together) and the

 

 

 

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transfer of NYSE Euronext shares to Holdco by U.S. holders.

Conditions Waivable by Deutsche Börse:

 

   

prior to the expiration of the acceptance period, there must not have occurred an “offer material adverse effect” on NYSE Euronext; and

 

   

Deutsche Börse must have received a private letter ruling from the IRS or an opinion of counsel regarding the tax treatment of the exchange offer (and/or the merger and the exchange offer taken together).

In addition to or in lieu of the conditions to the exchange offer set forth in the business combination agreement, BaFin, in its sole discretion, may require that the conditions to the exchange offer be changed or that further conditions be included.

Approval of the Merger by the NYSE Euronext Shareholders

The completion of the combination is subject to the approval by the NYSE Euronext shareholders of the proposal to adopt the business combination agreement and the proposals relating to Holdco’s articles of association.

Minimum Tender Condition by Deutsche Börse Shareholders

The completion of the combination is subject to the condition that at the time of expiration of the offer acceptance period, the sum of (i) Deutsche Börse shares that have been validly tendered and not validly withdrawn and (ii) Deutsche Börse shares that Holdco already holds or has acquired equals at least 75% of the sum of (x) Deutsche Börse shares issued as of the expiration of the offer acceptance period and (y) the number of all Deutsche Börse shares that Deutsche Börse may issue after the expiration of the offer acceptance period pursuant to existing obligations (e.g. in the event of options being exercised).

Competition and Antitrust

The completion of the combination is subject to the receipt of competition and antitrust clearances in the United States and in the European Union.

Deutsche Börse and NYSE Euronext have submitted notifications under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules promulgated thereunder. Notification and approval is also required from the European Commission, pursuant to Council Regulation (EC) No. 139/2004.

At any time before combination, the Antitrust Division of the U.S. Department of Justice (which is referred to in this document as the “DOJ”), the U.S. Federal Trade Commission (which is referred to in this document as the “FTC”), a U.S. state attorney general or the European Commission could take action under the relevant antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the combination, seeking divestiture of substantial assets of Deutsche Börse or NYSE Euronext or their subsidiaries or requiring operational restrictions. Similarly, the European Commission could prohibit the combination or require modifications, including divestiture of substantial assets, before allowing the combination to proceed. The DOJ, the FTC and U.S. state attorneys general may also take action after the combination. Private parties may also bring legal actions under the antitrust laws under certain circumstances. Obtaining antitrust clearance from the DOJ and the European Commission is a condition to the completion of the combination. While Deutsche Börse and NYSE Euronext believe that they will receive the requisite regulatory approvals for the combination, they can give no assurance that a challenge to the combination will not be made including by non-US and non-EU competition authorities or, if made, would be unsuccessful.

Securities and Other Regulatory Authorities

European Regulators

The conditions to the completion of the combination include approvals by certain regulators, including:

 

   

declaration of no objection to the exchange offer, the merger and the other transaction contemplated by the business combination agreement by the College of Euronext Regulators, pursuant to the Memorandum of Understanding dated June 24, 2010;

 

   

declaration of no objection from the Dutch Minister of Finance (with advice from the Netherlands Authority for the Financial

 

 

 

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Markets (Autoriteit Financiële Markten) (which is referred to in this document as the “AFM”)) pursuant to section 5:32d of the Dutch Financial Supervision Act (Wet op het financieel toezicht) allowing Holdco to indirectly acquire shares in Euronext Amsterdam N.V. and certain other licensed Dutch subsidiaries of NYSE Euronext;

 

   

confirmation, reissuance, renewal or amendment by the AFM, the Dutch Minister of Finance (with advice from the AFM), or by the AFM on behalf of the Dutch Minister of Finance, as applicable, of the existing declarations of no objection issued to NYSE Euronext and certain of its subsidiaries pursuant to Sections 5:32d or 3:95(1)(c) of the Dutch Financial Supervision Act, in each case allowing the relevant entity to, directly or indirectly, acquire or hold the shares of Euronext Amsterdam N.V. and of certain other licensed Dutch subsidiaries of NYSE Euronext;

 

   

review and approval by the Dutch Minister of Finance and the AFM of the proposed transaction pursuant to, and confirmation, reissuance, renewal or amendment of, the existing exchange license granted to Euronext Amsterdam N.V. as well as certain subsidiaries of NYSE Euronext pursuant to Sections 5:26 and 2:96 of the Dutch Financial Supervision Act;

 

   

declaration of no objection of the Stock Exchanges Supervisory Authorities of Hesse, Saxony and Berlin to the acquisition of Deutsche Börse, Scoach Europa AG, European Energy Exchange AG, EEX Power Derivatives GmbH and Tradegate Exchange GmbH, each in its capacity as a stock exchange supporting organization; and

 

   

declaration of no objection by BaFin to the indirect acquisition of European Commodity Clearing AG, Eurex Clearing AG, Eurex Repo GmbH, Eurex Bonds GmbH and Clearstream Banking AG pursuant to Section 2c of the German Banking Act.

U.S. Securities and Exchange Commission

The completion of the combination is subject to receipt of approval from the SEC regarding the combination and the transactions contemplated thereby. The SEC has the right to approve the rules of the U.S. securities exchanges that will be indirectly owned by Holdco, and is expected to review certain aspects of the organizational documents of Holdco and its subsidiaries to the extent that they affect these U.S. securities exchanges: New York Stock Exchange LLC, NYSE Arca, Inc., NYSE Amex LLC, International Securities Exchange, LLC (which is referred to in this document as “ISE”), EDGA Exchange, Inc. (which is referred to in this document as “EDGA”) and EDGX Exchange, Inc. (which is referred to in this document as “EDGX”). Holdco will file applications with the SEC seeking approval of certain elements of the proposed organization and operations described in this document.

Other Approvals

In addition to the regulatory approvals noted above, the completion of the combination is subject to the receipt of all other governmental approvals or the making of all other required governmental filings (including any required approvals or filings for amendments to existing, or the granting of new exchange licenses and recognitions), the failure of which to be obtained or made, individually or in the aggregate, would reasonably be expected to have a material adverse effect on Deutsche Börse Group, NYSE Euronext or Holdco. The combination may also be subject to the approval by the Committee on Foreign Investment in the United States (which is referred to in this document as “CFIUS”) under the Exon-Florio amendment.

Appraisal Rights

Deutsche Börse

Under German law, Deutsche Börse shareholders will generally not be entitled to appraisal rights in connection with the exchange offer. However, if Holdco (directly and/or through a subsidiary) effects the post-completion reorganization by way of a domination agreement or a combination of a domination agreement and a profit and loss transfer

 

 

 

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agreement and/or by way of a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act under German law, an appraisal proceeding (Spruchverfahren) is available under the German Appraisal Proceedings Act (Spruchverfahrensgesetz), pursuant to which a court can be asked to determine the adequacy of consideration or compensation paid to the Deutsche Börse shareholders under the domination agreement or the combination of a domination agreement and a profit transfer agreement and in connection with the squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act, respectively.

Such appraisal proceeding will, however, not be available in connection with a squeeze-out transaction which is performed by Holdco by applying for a court order in accordance with Sections 39a et seq. of the German Takeover Act.

NYSE Euronext

Under the Delaware general corporation law, which governs the merger, as well as under the NYSE Euronext certificate of incorporation and bylaws, NYSE Euronext shareholders are not entitled to any appraisal rights in connection with the merger.

Directors and Management of Holdco Following the Combination

Holdco Board of Directors

Following the combination, the Holdco board of directors will consist of 17 members, including Reto Francioni, the current chief executive officer of Deutsche Börse, who will serve as the chairman of the Holdco group and Duncan L. Niederauer, the current chief executive officer of NYSE Euronext, who will serve as the Holdco group chief executive officer. In addition, 15 non-executive directors, consisting of nine non-executive directors designated by Deutsche Börse and six non-executive directors designated by NYSE Euronext will serve on the Holdco board of directors.

The directors will be appointed for a term (or several consecutive terms) that expires at the Holdco annual general meeting of shareholders occurring in

2015 (or in 2016 in the case of the Holdco group chairman and the Holdco group chief executive officer).

Holdco Group Chairman

The business combination agreement provides that Reto Francioni, the current chief executive officer of Deutsche Börse, will be the Holdco group chairman for an initial term (or several consecutive terms) expiring at the end of the annual general meeting of shareholders of Holdco occurring in 2016. During this term, the Holdco group chairman will have customary duties of a chairman, such as leading meetings of Holdco’s board of directors and setting meeting agendas, as well as certain additional agreed responsibilities and authorities.

Until the sixth annual general meeting of shareholders after completion of the combination, the Holdco group chairman will have a primary office in Frankfurt and a secondary office in New York, and the Holdco group chief executive officer will have a primary office in New York and a secondary office in Frankfurt. Alternatively, the Holdco group chairman and the Holdco group chief executive officer may decide to switch their office locations in a reciprocal manner, with the Holdco group chairman having his or her primary office in New York if the Holdco group chief executive officer has his or her primary office in Frankfurt.

Holdco Group Chief Executive Officer

The business combination agreement provides that Duncan L. Niederauer, the current chief executive officer and a director of the NYSE Euronext, will be the Holdco group chief executive officer for an initial term (or several consecutive terms) expiring at the end of the annual general meeting of shareholders occurring in 2016. During this term, the Holdco group chief executive officer will have the typical roles of a chief executive officer.

 

 

 

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Board Committees

Upon completion of the combination, the Holdco board of directors will initially have the following six committees:

 

   

Audit, Finance and Risk Committee;

 

   

Nomination, Governance and Corporate Responsibility Committee;

 

   

Human Resources and Compensation Committee;

 

   

Strategy Committee;

 

   

Integration Committee; and

 

   

Technology Committee.

Each of the committees mentioned above will consist of three directors nominated for appointment upon designation by Deutsche Börse and two directors nominated for appointment upon designation by NYSE Euronext until the end of the annual general meeting of shareholders occurring in 2015.

Global Executive Committee of Holdco

The Global Executive Committee of the Holdco group will consist of four individuals who are currently executives of NYSE Euronext, including the chief executive officer of NYSE Euronext, and four individuals who are currently executives of Deutsche Börse. The Global Executive Committee will be responsible for the management of the day-to-day business of the Holdco group. The members of the Global Executive Committee will strive to reach decisions on a unanimous basis, and the Holdco group chief executive officer will decide any matters which are not unanimous. Any appointment of members of the Global Executive Committee will be made by the Holdco group chief executive officer in close consultation with the Holdco group chairman and the Holdco board of directors.

Dual Headquarters

The Holdco articles of association to be effective upon completion of the combination will

provide that the Holdco group will have dual headquarters in Frankfurt and New York.

Third-Party Acquisition Proposals

Subject to certain exceptions, the business combination agreement generally restricts the ability of Deutsche Börse and NYSE Euronext to solicit or engage in discussions or negotiations with a third-party regarding a proposal to acquire a significant interest in either entity.

Under certain circumstances, the Deutsche Börse management board, the Deutsche Börse supervisory board and the NYSE Euronext board of directors may engage in discussions or negotiations in response to a bona fide unsolicited written acquisition proposal if they conclude that there is a reasonable likelihood that such proposal could constitute a superior proposal (as defined in the business combination agreement) and due compliance with their respective fiduciary duties so requires.

If, prior to the consummation of the exchange offer or NYSE Euronext shareholder approval, the Deutsche Börse management board, the Deutsche Börse supervisory board or the NYSE Euronext board of directors, respectively, in good faith conclude (following receipt of the advice of their financial advisors and outside legal counsel), taking into account, among other things, all legal, financial, regulatory, timing and other aspects of the acquisition proposal or offer, and taking into account any improved terms that either Deutsche Börse or NYSE Euronext may have offered, that the acquisition proposal constitutes a superior proposal, then, in the case of Deutsche Börse, the Deutsche Börse management board and the Deutsche Börse supervisory board may change their recommendation that the Deutsche Börse shareholders tender their Deutsche Börse shares in the exchange offer, and, in the case of NYSE Euronext, the NYSE Euronext board of directors may change its recommendation that the NYSE Euronext shareholders vote in favor of the business combination agreement and the transactions contemplated by the business combination agreement.

 

 

 

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Termination of the Business Combination Agreement

Deutsche Börse and NYSE Euronext may jointly agree to terminate the business combination agreement at any time. Either Deutsche Börse or NYSE Euronext may also terminate the business combination agreement in various circumstances, including, but not limited to, failure to receive the necessary NYSE Euronext shareholder approval, failure to obtain a necessary governmental approval, failure to achieve the minimum tender condition, failure to complete the combination by December 31, 2011 (subject to extension to March 31, 2012 by either party in certain circumstances) or upon the breach by the other party of certain of its obligations under the business combination agreement. See “The Business Combination Agreement — Termination.”

Stock Exchange Listing and Stock Prices

Deutsche Börse shares are listed on the Frankfurt Stock Exchange under the symbol “DB1.” NYSE Euronext shares, which are listed on the New York Stock Exchange and Euronext Paris under the symbol “NYX,” will be delisted from the New York Stock Exchange and Euronext Paris as soon as practicable after the completion of the combination, as permitted by applicable law.

Holdco (i) intends to list its shares on the New York Stock Exchange subject to the notice of issuance and (ii) Holdco will apply prior to the time of delivery of the Holdco shares to the shareholders of Deutsche Börse pursuant to the exchange offer and to the NYSE Euronext shareholders pursuant to the merger for admission of its shares to trading on the regulated market (regulierter Markt) of the Frankfurt Stock Exchange and simultaneously in the regulated market segment of Euronext Paris.

Certain Differences in Shareholder Rights Before and After the Combination

Until the completion of the combination (and in the case of Deutsche Börse shareholders that do not tender their Deutsche Börse shares in the exchange offer, until the completion of the post-completion reorganization), Delaware law and the NYSE

Euronext certificate of incorporation and bylaws will continue to govern the rights of NYSE Euronext shareholders, and German law and the Deutsche Börse articles of incorporation will continue to govern the rights of Deutsche Börse shareholders. After completion of the combination (or, as applicable, the post-completion reorganization), Dutch law and the Holdco articles of association will govern the rights of Holdco shareholders.

Material differences in the rights of NYSE Euronext shareholders prior to the combination and the rights of Holdco shareholders after the combination, on the other hand, will include, among others, the following:

 

   

Amendments to Holdco’s articles of association and certain extraordinary actions will require the approval of at least a two-thirds majority of the votes cast in a general meeting of shareholders in order to be effective.

 

   

The election of directors (other than those nominated by the Holdco board of directors) and the removal of directors will require a two-thirds majority of the votes cast, and such votes must represent more than one-half of Holdco’s issued capital on the resolution proposed for such an action.

 

   

Each of the Holdco directors initially designated by NYSE Euronext and Deutsche Börse will be nominated by the Holdco board of directors for re-election pursuant to a binding nomination at each of the annual general meetings of shareholders in 2012, 2013 and 2014, except that the Holdco group chairman and the Holdco group chief executive officer will each also be nominated pursuant to a binding nomination for re-election to the Holdco board of directors at the annual general meeting of shareholders occurring in 2015. Under Dutch law and Holdco’s articles of association, binding nominations may only be overridden by a shareholders resolution passed by a two-thirds majority of the votes cast, with such votes representing more than one-half of

 

 

 

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Holdco’s issued capital. Alternatively, if Holdco determines that it is a “foreign private issuer” and is not otherwise required by applicable law, regulation or stock exchange listing standards to hold annual director elections, then the initial members of the Holdco board of directors will be appointed to serve on the board for a term that expires at the Holdco annual general shareholders meeting in 2015 (or in 2016 in the case of the Holdco group chairman and the Holdco group chief executive officer).

Summary of Risk Factors

Risks Relating to the Combination

 

   

Because the exchange ratios in the exchange offer and the merger are fixed, the market value of the Holdco shares received by Deutsche Börse shareholders in the exchange offer or the Holdco shares received by NYSE Euronext shareholders in the merger may be less than the market value of the Deutsche Börse shares or NYSE Euronext shares that such holder held prior to the completion of the combination.

 

   

Obtaining required regulatory approvals may prevent or delay completion of the combination or reduce the anticipated benefits of the combination.

 

   

The implementation of the post-closing reorganization may be delayed.

 

   

Holdco may not be able to successfully integrate the businesses and operations of Deutsche Börse Group and/or NYSE Euronext in a timely fashion or at all.

 

   

Holdco may fail to realize the anticipated cost savings, growth opportunities and synergies and other benefits anticipated from the combination.

 

   

Holdco, Deutsche Börse Group and NYSE Euronext will incur significant transaction and combination-related costs in connection with the combination, some of

   

which are payable regardless of whether the combination is completed.

 

   

Upon completion of the combination certain change-of-control rights under material agreements may be triggered.

 

   

Uncertainties associated with the combination may cause a loss of management personnel and other key employees, which could materially adversely affect the business and results of operations of Holdco.

 

   

Holdco has no operating or financial history and results of operations may differ significantly from the unaudited pro forma financial data included in this document.

 

   

Failure to complete the combination could negatively affect the prices of the Deutsche Börse shares and the NYSE Euronext shares and the future businesses and financial results of Deutsche Börse Group and NYSE Euronext.

 

   

The rights and responsibilities of the shareholders of Holdco will be governed by Dutch law and Holdco’s articles of association, which will differ in some respects from the rights and responsibilities of shareholders under German or Delaware law and the current organizational documents of Deutsche Börse and NYSE Euronext.

 

   

U.S. civil liabilities may not be enforceable.

 

   

Deutsche Börse shareholders and NYSE Euronext shareholders will have a reduced ownership and voting interest after the combination and will exercise less influence over management.

 

   

If Deutsche Börse shareholders do not tender their Deutsche Börse shares in the exchange offer, the consideration that Deutsche Börse shareholders may receive at a later point in time may substantially differ in form and/or value from the consideration that they would have received had they tendered their Deutsche

 

 

 

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Börse shares in the exchange offer, and they may also be subject to additional taxes.

 

   

Shareholders of Deutsche Börse not participating in the exchange offer will be diluted due to the obligation of Deutsche Börse to tender its treasury shares in the exchange offer.

 

   

If, following the completion of the exchange offer, some Deutsche Börse shares remain outstanding, then the liquidity and market value of those shares could be materially adversely affected.

Risks Relating to the Businesses of Holdco, Deutsche Börse Group and NYSE Euronext

 

   

Insufficient systems capacity and systems failures could adversely affect Deutsche Börse Group’s and NYSE Euronext’s businesses.

 

   

Deutsche Börse Group and NYSE Euronext operate in a business environment that continues to experience significant and rapid technological change.

 

   

Service deficiency in Deutsche Börse Group’s and NYSE Euronext’s manual data processing could result in losses.

 

   

A failure to protect Deutsche Börse Group’s and NYSE Euronext’s intellectual property rights, or allegations that Deutsche Börse Group and/or NYSE Euronext have infringed intellectual property rights of others, could adversely affect Holdco’s business.

 

   

Deutsche Börse Group and NYSE Euronext face significant competition and compete globally with a broad range of market participants for listings, trading, clearing and settlement volumes. Increasing competition could result in a decrease of their trading volumes and revenues.

 

   

Holdco’s business may be adversely affected by intense price competition.

 

   

A change in the policy of the administrative bodies of the exchanges in Germany could reduce Deutsche Börse Group’s revenue.

   

Adverse economic conditions could negatively affect Holdco’s business and cash flows, financial condition and results of operations.

 

   

Broad market trends and other factors beyond the control of Deutsche Börse Group and NYSE Euronext could significantly reduce demand for their services.

 

   

Deutsche Börse Group and NYSE Euronext may be at greater risk from terrorism than other companies.

 

   

Deutsche Börse Group and NYSE Euronext are exposed to fluctuations in foreign exchange rates and interest rates.

 

   

Deutsche Börse Group and NYSE Euronext are exposed to liquidity risk and may lack sufficient liquidity to meet their daily payment obligations or may incur increased refinancing costs.

 

   

Deutsche Börse Group’s and NYSE Euronext’s businesses may be adversely affected by risks associated with clearing and settlement activities.

 

   

Deutsche Börse Group’s share of trading in Deutsche Börse Group listed securities and NYSE Euronext’s share of trading in NYSE Euronext listed securities has declined and may continue to decline.

 

   

If Deutsche Börse Group’s or NYSE Euronext’s goodwill or intangible assets become impaired, Deutsche Börse Group, NYSE Euronext and, after the combination, Holdco may be required to record a significant charge to earnings.

 

   

Deutsche Börse Group and NYSE Euronext are subject to significant litigation risks and other liabilities.

 

   

Deutsche Börse Group’s and NYSE Euronext’s networks and those of their third-party service providers may be vulnerable to security risks.

 

 

 

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If the indices and other products of Deutsche Börse Group and NYSE Euronext contain undetected errors or fail to perform properly, this could have a material adverse effect on their business, financial condition or results of operation.

 

   

Deutsche Börse Group’s and NYSE Euronext’s reliance on third parties could adversely affect their businesses if these third parties cease to perform the functions that they currently perform.

 

   

Holdco will face risks when entering into or increasing its presence in markets where Deutsche Börse Group and NYSE Euronext do not currently compete or when entering into new business lines.

 

   

Damage to Holdco’s, Deutsche Börse Group’s and/or NYSE Euronext’s reputation could materially adversely affect Holdco’s business.

 

   

Deutsche Börse Group and NYSE Euronext may complete acquisitions and dispositions prior to completion of the combination that may affect their respective businesses and/or the value of the consideration to be received by Deutsche Börse shareholders and NYSE Euronext shareholders in the combination.

 

   

Future business combinations, acquisitions, partnerships and joint ventures may require significant resources and/or result in significant unanticipated costs or liabilities.

Risks Relating to Regulatory Environment and Legal Risks

 

   

Further uncertainties in connection with the resolution on and implementation of new regulations may reduce the level of activities of Deutsche Börse Group and/or NYSE Euronext.

 

   

Regulatory changes or court rulings may have an adverse impact on Deutsche Börse Group’s and NYSE Euronext’s ability to derive revenue from market data fees.

   

The legal and regulatory environment in the United States may make it difficult for NYSE Euronext’s U.S. exchanges to compete with non-U.S. exchanges for the listings of non-U.S. companies and adversely affect its competitive position.

 

   

Deutsche Börse Group and NYSE Euronext operate in a highly regulated industry and may be subject to censures, fines and other legal proceedings if they fail to comply with their legal and regulatory obligations.

 

   

Holdco may face competitive disadvantages, or may lose or impede its business opportunities, if it does not receive necessary or timely regulatory approvals for new business initiatives.

 

   

NYSE Euronext’s reliance on FINRA to perform regulatory functions has increased, and Holdco’s business could be adversely affected if they cease to perform these functions.

 

   

Deutsche Börse Group’s obligations in connection with its regulatory functions may limit its funding resources.

 

   

Regulatory changes requiring exchange operators to allow additional central counterparties to clear trades on their exchanges may adversely affect Deutsche Börse Group’s and NYSE Euronext’s clearing operations.

 

   

Conflicts of interest between Deutsche Börse Group’s and NYSE Euronext’s for-profit status and their regulatory responsibilities may adversely affect their businesses.

Risks Relating to Tax Matters

 

   

There can be no assurances that U.S. holders of NYSE Euronext shares will not be required to recognize a gain for U.S. federal income tax purposes upon the exchange of NYSE Euronext shares for Holdco shares in the merger.

 

 

 

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Holdco, Deutsche Börse, NYSE Euronext and their respective subsidiaries are subject to tax audits and could incur significant tax liabilities as a result of such audits.

 

   

Holdco may be or become taxable in a jurisdiction other than the Netherlands and/or may be or become a “dual resident company.” This may increase the aggregate tax burden on Holdco and its shareholders. The combination of the businesses of Deutsche Börse Group and NYSE Euronext may result in an increase in the overall tax burden of the combined group.

Risks Relating to Holdco Shares

 

   

There has been no prior public market for Holdco shares, and the market price of Holdco shares may be volatile.

 

   

Following the completion of the combination, Holdco may cease to be a foreign private issuer, which could result in significant additional costs and expenses.

 

   

If Holdco continues to be a foreign private issuer, you may not receive the information about Holdco that you would typically receive from a publicly traded U.S. domestic company.

 

   

The level of any dividend paid in respect of Holdco shares is subject to a number of factors, including the financial condition and results of operations of Deutsche Börse Group and NYSE Euronext, as well as the distributions of operating earnings to Holdco by Deutsche Börse Group and NYSE Euronext and the freely distributable reserves of Holdco.

 

   

Shareholders of Holdco could be diluted in the future.

 

 

 

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Selected Financial Information of Holdco

Holdco was formed on February 10, 2011; accordingly, the financial statements as of the date of this document only consist of the opening balance sheet. As Holdco had no operations as of February 10, 2011, Holdco omitted the statement of comprehensive income, statement of cash flows and statement of changes in equity and the notes thereto.

The opening balance sheet of Holdco included assets in the amount of €45,000 as well as corresponding issued and paid-up share capital in the amount of €45,000.

Selected Historical Financial Information of NYSE Euronext

The following selected consolidated financial data has been derived from the historical consolidated financial statements and related notes for the years ended December 31, 2006 through December 31, 2010, which have been prepared in accordance with U.S. GAAP. As a result of a change in NYSE Euronext’s reportable business segments effective in the first quarter of 2010, historical financial data has been revised to conform to this change. The information presented here is only a summary, and it should be read together with NYSE Euronext’s consolidated financial statements included in this document. The information set forth below is not necessarily indicative of NYSE Euronext’s results of future operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of NYSE Euronext.”

 

 

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Statement of Operations Data

 

     Year Ended December 31,  
     2010     2009     2008     2007(1)     2006  
     (in millions of U.S. dollars, except per share data)  

Revenues

          

Transaction and clearing fees

   $ 3,128      $ 3,427      $ 3,536      $ 2,760      $ 1,349   

Market data

     373        403        428        371        223   

Listing

     422        407        395        385        356   

Technology services

     318        223        159        130        137   

Other revenues(2)

     184        224        184        292        311   
                                        

Total revenues

     4,425        4,684        4,702        3,938        2,376   

Section 31 fees

     315        388        229        556        673   

Liquidity payments, routing and clearing

     1,599        1,818        1,592        951        339   
                                        

Total revenues, less transaction-based expenses

     2,511        2,478        2,881        2,431        1,364   
                                        

Other operating expenses

          

Compensation

     613        649        664        612        558   

Depreciation and amortization

     281        266        253        240        136   

Systems and communication

     206        225        317        264        120   

Professional services

     282        223        163        112        110   

Impairment charges

     —          —          1,590        —          —     

Selling, general and administrative

     296        313        305        257        152   

Merger expenses and exit costs

     88        516        177        67        54   
                                        

Operating income (loss) from continuing operations

     745        286        (588     879        234   

Net interest and investment (loss) income

     (108     (111     (99     (60     41   

Other income

     49        30        42        73        54   
                                        

Income (loss) from continuing operations before income tax (provision) benefit

     686        205        (645     892        329   

Income tax (provision) benefit

     (128     7        (95     (243     (121
                                        

Income (loss) from continuing operations

     558        212        (740     649        208   

Income from discontinued operations, net of tax(3)

     —          —          7        4        —     
                                        

Net income (loss)

   $ 558      $ 212      $ (733   $ 653      $ 208   

Net loss (income) attributable to noncontrolling interest

     19        7        (5     (10     (3
                                        

Net income (loss) attributable to NYSE Euronext

   $ 577      $ 219      $ (738   $ 643      $ 205   
                                        

Basic earnings (loss) per share attributable to NYSE Euronext:

          

Continuing operations

   $ 2.21      $ 0.84      $ (2.81   $ 2.70      $ 1.38   

Discontinued operations

     —          —          0.03        0.02        —     
                                        
   $ 2.21      $ 0.84      $ (2.78   $ 2.72      $ 1.38   
                                        

Diluted earnings (loss) per share attributable to NYSE Euronext:

          

Continuing operations

   $ 2.20      $ 0.84      $ (2.81   $ 2.68      $ 1.36   

Discontinued operations

     —          —          0.03        0.02        —     
                                        
   $ 2.20      $ 0.84      $ (2.78   $ 2.70      $ 1.36   
                                        

Basic weighted average shares outstanding

     261        260        265        237        149 (5) 

Diluted weighted average shares outstanding

     262        261        265        238        150 (5) 

Dividends per share

   $ 1.20      $ 1.20      $ 1.15      $ 0.75      $ —     

 

 

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Balance Sheet Data

 

     Year Ended December 31,  
     2010     2009     2008     2007(1)     2006  
     (in millions of U.S. dollars)  

Total assets

   $ 13,378      $ 14,382      $ 13,948      $ 16,618      $ 3,466   

Current assets

   $ 1,174      $ 1,520      $ 2,026      $ 2,278      $ 1,443   

Current liabilities

     1,454        2,149        2,582        3,462        806   
                                        

Working capital

   $ (280   $ (629   $ (556   $ (1,184   $ 637   
                                        

Long term liabilities(4)

   $ 3,006      $ 3,132      $ 3,005      $ 3,102      $ 991   

Long term debt

     2,074        2,166        1,787        494        —     

NYSE Euronext shareholders’ equity

   $ 6,796      $ 6,871      $ 6,556      $ 9,384      $ 1,669   

 

Notes:

(1) The results of operations of Euronext have been included since April 4, 2007.
(2) Effective July 30, 2007, the member firm regulatory functions of NYSE Regulation, including related enforcement activities, risk assessment and the arbitration service, were transferred to FINRA. Regulatory revenues, a component of other revenues, decreased as a result of this transfer and in connection with pricing changes.
(3) The operations of GL Trade, which were sold on October 1, 2008, are reflected as discontinued.
(4) Represents liabilities due after one year, including accrued employee benefits, deferred revenue, and deferred income taxes.
(5) Adjusted to reflect the March 7, 2006 merger between the New York Stock Exchange, Inc. and Archipelago Holdings, Inc., giving retroactive effect to the issuance of shares to former New York Stock Exchange, Inc. members.

 

 

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Selected Historical Financial Information of Deutsche Börse Group

The following financial information has been derived from the consolidated financial statements of Deutsche Börse Group and related notes as of and for the years ended December 31, 2010, 2009 and 2008, which have been prepared in accordance with IFRS. As a result of a change in Deutsche Börse Group’s reportable business segments effective in the first quarter 2010, historical financial information has been revised to conform to this change. The information presented here is only a summary, and it should be read together with Deutsche Börse Group’s consolidated financial statements included in this document. The information set forth below is not necessarily indicative of Deutsche Börse Group’s future operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Deutsche Börse Group.”

 

Income Statement Data

 
     January 1 to December 31,  
     2010     2009     2008     2007     2006  
     (in millions of euros)  

Sales revenue

     2,106.3        2,061.7        2,455.1        2,185.2        1,854.2   

Net interest income from banking business

     59.4        97.4        236.8        230.8        150.7   

Other operating income

     61.0        130.6        66.7        223.4        85.8   
                                        

Total revenue

     2,226.7        2,289.7        2,758.6        2,639.4        2,090.7   

Volume related costs

     (210.9     (250.3     (270.1     (223.1     (191.1
                                        

Total revenue less volume related costs

     2,015.8        2,039.4        2,488.5        2,416.3        1,899.6   

Staff costs

     (502.0     (394.3     (409.8     (555.3     (404.5

Depreciation, amortization and impairment losses

     (583.5     (569.1     (137.1     (126.0     (132.0

Other operating expenses

     (414.7     (433.4     (439.0     (394.0     (344.2
                                        

Operating costs

     (1,500.2     (1,396.8     (985.9     (1,075.3     (880.7

Result from equity investments

     12.2        (4.8     5.8        4.9        8.6   
                                        

Earnings before interest and tax (EBIT)

     527.8        637.8        1,508.4        1,345.9        1,027.5   

Financial income

     24.0        51.0        237.6        126.3        62.8   

Financial expense

     (132.2     (130.7     (277.1     (117.4     (64.3
                                        

Earnings before tax (EBT)

     419.6        558.1        1,468.9        1,354.8        1,026.0   

Income tax expense

     (24.5     (86.9     (418.6     (439.9     (360.0

Net profit for the year

     395.1        471.2        1,050.3        914.9        666.0   

thereof shareholders of parent company (net income)

     417.8        496.1        1,033.3        911.7        668.7   

thereof non-controlling interests

     (22.7     (24.9     17.0        (3.2     2.7   

Weighted average number of shares (in millions)

     185.9        185.9        190.5        194.0        198.8 (1) 

Diluted weighted average number of shares (in millions)

     186.2        186.1        190.8        194.1        198.9 (1) 

Earnings per share (basic) (in euros)

     2.25        2.67        5.42        4.70        3.36 (2) 

Earnings per share (diluted) (in euros)

     2.24        2.67        5.41        4.70        3.36 (2) 

Dividends per share

     2.10        2.10        2.10        2.10        1.70   

Notes:

(1) In order to enhance comparability with the reporting year 2007 the figures for weighted average number of shares and diluted weighted average number of shares were adjusted due to the share split in 2007 and the increase in subscribed capital.
(2) In order to enhance comparability with the reporting year 2007 the amounts for basic and diluted earnings per share were adjusted due to the share split in 2007.

 

Balance Sheet Data

 
     As at December 31,  
     2010      2009      2008      2007     2006  
Assets    (in millions of euros)  

NONCURRENT ASSETS

             

Intangible assets

     3,089.9         3,431.5         3,446.5         3,400.0 (1)      1,214.0   

Property, plant and equipment

     138.2         99.4         108.9         98.3        235.5   

Financial assets

     1,806.0         1,709.7         972.5         630.2        439.4   

Other noncurrent assets

     27.7         5.6         13.5         18.3        18.7   

Deferred tax receivables

     7.7         4.8         3.5         17.2        0   
                                           

Total noncurrent assets

     5,069.5         5,251.0         4,544.9         4,164.0        1,907.6   

 

 

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Balance Sheet Data

 
     As at December 31,  
     2010      2009      2008      2007     2006  
Assets    (in millions of euros)  

CURRENT ASSETS

             

Receivables and other current assets

             

Financial instruments of Eurex Clearing AG

     128,823.7         143,178.4         121,684.3         60,424.0        53,956.9   

Receivables and securities from banking business

     7,585.3         7,192.4         8,428.0         9,619.7        6,645.0   

Other current assets

     389.1         433.4         373.9         649.7 (1)      280.4   
                                           

Total receivables and other current assets

     136,798.1         150,804.2         130,486.2         70,693.4 (1)      60,882.3   

Restricted bank balances

     6,185.8         4,745.6         10,364.7         4,221.7        1,582.8   

Other cash and bank balances

     797.1         559.7         482.8         547.6        652.4   
                                           

Total current assets

     143,781.0         156,109.5         141,333.7         75,462.7 (1)      63,117.5   

Total assets

     148,850.5         161,360.5         145,878.6         79,626.7 (1)      65,025.1   

 

Note:

 

(1) Due to the retrospective reduction of the tax rate applied in the course of the purchase price allocation following the acquisition of ISE, the amount for intangible assets has been adjusted accordingly.

 

Balance Sheet Data

 
     As at December 31,  
     2010      2009      2008      2007     2006  
Equity and liabilities    (in millions of euros)  

EQUITY

             

Shareholders’ equity

     2,951.4         2,866.2         2,654.3         2,377.3        2,263.4   

Non-controlling interests

     458.9         472.6         324.0         312.9        19.9   
                                           

Total equity

     3,410.3         3,338.8         2,978.3         2,690.2        2,283.3   

NONCURRENT LIABILITIES

             

Interest-bearing liabilities(1)

     1,455.2         1,514.9         1,512.9         1.2        499.9   

Long term debt

     415.2         578.6         700.8         739.3 (3)      146.5   
                                           

Total noncurrent liabilities

     1,870.4         2,093.5         2,213.7         740.5        646.4   

CURRENT LIABILITIES

             

Financial instruments of Eurex Clearing AG

     128,823.7         143,178.4         121,684.3         60,424.0        53,956.9   

Liabilities from banking business(2)

     7,822.0         7,221.0         7,916.3         9,125.9        6,078.7   

Cash deposits by market participants

     6,064.2         4,741.5         10,220.7         4,016.2        1,509.0   

Other current liabilities

     859.9         787.3         865.3         2,629.9        550.8   
                                           

Total current liabilities

     143,569.8         155,928.2         140,686.6         76,196.0 (3)      62,095.4   
                                           

Total liabilities

     145,440.2         158,021.7         142,900.3         76,936.5 (3)      62,741.8   
                                           

Total equity and liabilities

     148,850.5         161,360.5         145,878.6         79,626.7        65,025.1   
                                           

 

Notes:

(1) Thereof €11.2 million (2009: €11.2 million; 2008: nil; 2007: nil; 2006: nil) payables to other investors.
(2) Thereof €0.1 million (2009: €198.0 million; 2008: €278.0 million; 2007: €95.1 million; 2006: nil) liabilities to associates.
(3) Includes an adjustment of deferred tax liabilities due to the retrospective reduction of the tax rate applied in the course of the purchase price allocation following the acquisition of ISE [in 2007].

 

Cash Flow Statement Data

 
     January 1 to December 31,  
     2010     2009     2008     2007     2006  
     (in millions of euros)  

Cash flows from operating activities

     943.9        801.5        1,278.9        839.6        843.4   
                                        

Cash flows from investing activities

     (520.1     (1,082.7     (939.6     (1,753.2     (269.8
                                        

Cash flows from financing activities

     (587.9     (454.9     (943.0     927.0        (592.1
                                        

Cash and cash equivalents as at end of period

     (445.5     (285.4     448.2        1,040.2        1,026.8   

 

 

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Holdco Selected Unaudited Pro Forma Condensed Consolidated Financial Information

The following table shows information about the pro forma financial condition and results of operations, including per share data, of Holdco after giving effect to the combination and assuming that all of the Deutsche Börse shares are exchanged in the exchange offer.

The table sets forth selected unaudited pro forma condensed consolidated income statement data for the fiscal year ended December 31, 2010 as if the business combination had become effective on January 1, 2010, and selected unaudited pro forma condensed consolidated balance sheet data as of December 31, 2010 as if the combination had become effective on that date and assuming that all of the Deutsche Börse shares are exchanged in the exchange offer. The information presented below should be read together with the historical financial statements of NYSE Euronext and Deutsche Börse, respectively, including the related notes thereto and the other unaudited pro forma financial data, including the related notes appearing elsewhere in this document. See “Holdco Unaudited Pro Forma Condensed Consolidated Financial Data.”

The selected unaudited pro forma condensed consolidated financial information presented below has been prepared on a basis consistent in all material respects with the accounting policies of Holdco in accordance with IFRS as issued by the International Accounting Standards Board. The income statement data of NYSE Euronext has been translated using an average exchange rate of $1.32 to €1.0. This average exchange rate was computed using the average of prevailing exchange rates as of each quarter end during the 2010 fiscal year. The balance sheet of NYSE Euronext data has been translated using an exchange rate of $1.33 to €1.0 corresponding to the spot rate as of December 31, 2010.

The unaudited pro forma condensed consolidated financial data is presented for illustrative purposes only and is not necessarily indicative of results that actually would have occurred had the combination been completed on the dates indicated or that may be obtained in the future. See “Holdco Unaudited Pro Forma Condensed Consolidated Financial Data,” “Risk Factors” and “General Information — Forward-Looking Statements.”

 

     Year Ended
December 31,
2010
 
Income Statement Data(1)    (in millions of
euros, except
per share data)
 

Total revenues

     5,611   

Earnings before interest and tax (EBIT)

     1,126   

Net profit attributable to shareholders of Holdco

     869   

Earnings per share (basic)

     2.82   

Earnings per share (diluted)

     2.80   

 

     As of
December 31,
2010
 
Balance Sheet Data(1)    (in millions of
euros)
 

Total assets

     161,142   

Total liabilities

     150,996   

Shareholders’ equity

     9,651   

Notes:

(1) Certain significant items related primarily to impairment and exit costs deemed significant by virtue of their size or incidence have been separately disclosed to enable a full understanding of the unaudited pro forma condensed consolidated financial performance. For a discussion of such items, see Note 6 under “Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.”

 

 

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Comparative Per Share Market Information and Exchange Rates

The following table sets forth the closing market price per share of Deutsche Börse shares and NYSE Euronext shares in euro or U.S. dollar, as the case may be, as reported on the Frankfurt Stock Exchange for Deutsche Börse shares or the New York Stock Exchange and Euronext Paris for NYSE Euronext shares. In each case, the prices are given:

 

   

as of February 8, 2011 (the last trading day prior to the date on which Deutsche Börse and NYSE Euronext publicly confirmed their engagement in advanced discussions regarding a potential business combination);

 

   

as of February 14, 2011 (the last trading day prior to the date of public announcement of the execution of the business combination agreement); and

 

   

as of [], 2011 (the latest practicable trading date prior to the date of this document).

You are urged to obtain current market quotations for Deutsche Börse shares and NYSE Euronext shares before making your decision with respect to the adoption of the business combination agreement and approval of the transactions contemplated by the business combination agreement. Deutsche Börse shares are listed on the Frankfurt Stock Exchange under the symbol “DB1.” NYSE Euronext shares are listed on the New York Stock Exchange and Euronext Paris under the symbol “NYX.”

The market price per share of Deutsche Börse shares and NYSE Euronext shares could change significantly and may not be indicative of the value of Holdco shares once they start trading. Because the exchange ratios will not be adjusted for changes in the market price of Deutsche Börse shares and NYSE Euronext shares, the value of Holdco shares that you will receive at the time of completion of the combination may vary significantly from the market value of the Holdco shares that you would have received if the combination were consummated on the date of the business combination agreement or on the date of this document.

Comparative Market Share Information

 

     Deutsche
Börse
     NYSE Euronext  
     Frankfurt
Stock
Exchange
Trading
     NYSE
Trading
     Euronext
Paris
Trading
     Equivalent
Value per
Deutsche
Börse
Share
 

February 8, 2011

     57.45       $ 33.41         24.18         27.00   

February 14, 2011

     61.33       $ 39.45         27.88         28.83   

[], 2011

   []       $ []       []       []   

 

 

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The following table sets forth, for the periods indicated, the high and low sale prices of NYSE Euronext shares and Deutsche Börse shares.

 

     NYSE Euronext      Deutsche Börse  
     NYSE Trading      Euronext Paris Trading      Frankfurt Stock
Exchange Trading
 
     High      Low            High                  Low            High      Low  

2006

     —           —           —           —         70.44       42.13   

2007(1)

   $ 99.99       $ 64.26       74.82       47.95       136.32       68.91   

2008

   $ 87.70       $ 16.33       59.51       13.35       134.66       43.40   

2009

   $ 31.93       $ 14.52       23.95       11.59       62.62       29.50   

2010

   $ 34.82       $ 22.30       25.81       16.23       59.00       45.45   

2009

                 

First quarter

   $ 30.60       $ 14.52       23.95       11.59       57.70       29.50   

Second quarter

   $ 31.93       $ 17.21       22.69       13.11       62.57       43.78   

Third quarter

   $ 30.44       $ 23.70       20.82       16.75       60.96       49.25   

Fourth quarter

   $ 30.00       $ 24.27       20.49       16.29       62.62       52.31   

2010

                 

First quarter

   $ 29.80       $ 22.30       22.15       16.23       58.93       45.45   

Second quarter

   $ 34.82       $ 26.42       25.81       21.42       59.00       48.46   

Third quarter

   $ 30.92       $ 26.58       23.41       20.58       55.43       47.36   

Fourth quarter

   $ 31.00       $ 27.30       23.00       20.55       53.29       46.33   

2011

                 

First quarter

   $ 39.99       $ 30.08       29.85       22.50       62.48       50.58   

2010

                 

September

   $ 30.20       $ 28.10       23.41       20.90       51.84       47.80   

October

   $ 30.94       $ 28.44       22.26       20.55       53.29       46.81   

November

   $ 31.00       $ 27.30       22.31       20.77       51.00       46.33   

December

   $ 30.22       $ 27.56       23.00       20.97       53.04       46.90   

2011

                 

January

   $ 33.38       $ 30.08       25.25       22.50       57.79       51.90   

February

   $ 39.99       $ 32.00       29.85       23.10       62.48       53.99   

March

   $ 38.08       $ 33.64       27.10       24.00       56.99       50.58   

 

Notes:

(1) Beginning as of April 4, 2007 for NYSE Euronext.

As of [], 2011, there were approximately [] holders of record of Deutsche Börse shares. As of [], 2011, there were approximately [] holders of record of NYSE Euronext shares.

 

 

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Exchange Rates

The following table shows for the period from January 1, 2005 through March 31, 2011, the low, high, average and period exchange rate U.S. dollars per euro.

 

     Exchange Rates  
     Low      High      Average     Period End  
     (U.S. dollars per euro)  

Year

          

2005

     1.1667         1.3476         1.2400 (1)      1.1842   

2006

     1.1860         1.3327         1.2661 (1)      1.3197   

2007

     1.2904         1.4862         1.3797 (1)      1.4603   

2008

     1.2446         1.6010         1.4695 (1)      1.3919   

2009

     1.2547         1.5100         1.3955 (1)      1.4332   

2010

     1.1959         1.4535         1.3216 (1)      1.3269   

Month

          

October 2010

     1.3619         1.4159         1.3900 (2)      1.3947   

November 2010

     1.2969         1.4282         1.3641 (2)      1.2983   

December 2010

     1.2971         1.3499         1.3227 (2)      1.3384   

January 2011

     1.2944         1.3715         1.3371 (2)      1.3371   

February 2011

     1.3474         1.3794         1.3648 (2)      1.3793   

March 2011

     1.3777         1.4226         1.4019 (2)      1.4158   

 

Notes:

(1) The average of the rates on the last business day of each month during the applicable period.
(2) The average of the daily rates on each business day during the applicable period.

Source: Bloomberg.

The rates presented above may differ from the actual rates used in the preparation of Holdco’s financial statements and other financial information appearing in this document. Holdco’s inclusion of such rates is not meant to suggest that the U.S. dollar amounts actually represent euro amounts or that such amounts could have been converted to U.S. dollars at any particular rate, if at all.

 

 

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Comparative Historical and Pro Forma Per Share Data

Set forth below are historical and pro forma amounts, per Deutsche Börse share and per NYSE Euronext share, of income from continuing operations, cash dividends and book value. The exchange ratio for the pro forma computations is one Holdco share for each Deutsche Börse share, and 0.47 Holdco share for each NYSE Euronext share.

You should read the information below together with the financial statements and related notes of Deutsche Börse and NYSE Euronext appearing elsewhere in this document. The unaudited pro forma consolidated data below is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on this information as being indicative of the historical results that would have been achieved had the companies always been combined or of the future results of Holdco. You should read the pro forma information below together with the unaudited pro forma condensed consolidated financial data included under “Holdco Unaudited Pro Forma Condensed Consolidated Financial Data.”

In addition, the market price of NYSE Euronext shares or Deutsche Börse shares could change significantly and may not be indicative of the value of shares of Holdco shares once they start trading. Because the exchange ratios will not be adjusted for changes in the market price of NYSE Euronext shares or Deutsche Börse shares, the value of the Holdco shares that NYSE Euronext shareholders will receive in the merger and that Deutsche Börse shareholders may receive if they tender their shares in the exchange offer may vary significantly from the market value of the Holdco shares that you would have received if the combination were consummated on the date of the business combination agreement or on the date of this document. You are urged to obtain current market quotations for Deutsche Börse and NYSE Euronext shares before making your decision with respect to the adoption of the business combination agreement and/or tendering of your Deutsche Börse shares in the exchange offer.

The following tables provide information for Deutsche Börse shares, NYSE Euronext shares and, after giving effect to the combination as if it had occurred as of January 1, 2010 and assuming that all of the Deutsche Börse shares are exchanged in the exchange offer, Holdco shares, including book value per share, cash dividends per share and earnings per share.

 

     Year Ended
December 31,
2010
 

Deutsche Börse Historical Per Share Data

  

Basic earnings per share

   2.25   

Diluted earnings per share

   2.24   

Cash dividends declared per share

   2.10   

Book value per share at end of period

   15.95   

NYSE Euronext Historical Per Share Data(1)

  

Basic earnings per share

   1.67   

Diluted earnings per share

   1.67   

Cash dividends declared per share

   0.91   

Book value per share at end of period

   19.57   

NYSE Euronext Equivalent Pro Forma Per Share Data(2)

  

Basic earnings per share

   1.33   

Diluted earnings per share

   1.32   

Cash dividends declared per share

   0.76   

Book value per share at end of period

   14.63   

 

 

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     Year Ended
December 31,
2010
 

Holdco Pro Forma Consolidated Per Share Data(3)

  

Basic earnings per share

   2.82   

Diluted earnings per share

   2.80   

Cash dividends declared per share

   1.62   

Book value per share at end of period

   31.12   

Notes:

(1) The income statement data of NYSE Euronext has been translated using an average exchange rate of $1.32 to €1.0. This average exchange rate was computed using the average of prevailing exchange rates as of each quarter end during the 2010 fiscal year. The NYSE Euronext balance sheet data has been translated using an exchange rate of $1.33 to €1.0 corresponding to the spot rate as of December 31, 2010.
(2) Determined using the related Holdco pro forma per share data multiplied by 0.47 (the proposed exchange ratio of a NYSE Euronext share for a Holdco share).
(3) Certain significant items related primarily to impairment and exit costs deemed significant by virtue of their size or incidence have been separately disclosed to enable a full understanding of the unaudited pro forma condensed consolidated financial performance. For a discussion of such items, see Note 6 under “Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.”

 

 

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RISK FACTORS

Before deciding to tender your shares in the exchange offer (if you are a Deutsche Börse shareholder) or vote in favor of the merger (if you are a NYSE Euronext shareholder), you should carefully review and consider the following risk factors and the other information contained in this document. The occurrence of one or more of the events or circumstances described in these risk factors alone or in combination with other events or circumstances may have a material adverse effect on Deutsche Börse Group’s and NYSE Euronext’s business and cash flows, financial condition and results of operations and, upon completion of the combination, on Holdco’s business and cash flows, financial condition and results of operations. The risks discussed below may not prove to be exhaustive and are based on certain assumptions made by Holdco, Deutsche Börse Group and NYSE Euronext which later may prove to be incorrect or incomplete. The risks discussed below may not be the only risks to which Holdco or, upon completion of the combination, through its subsidiaries, Deutsche Börse and NYSE Euronext, is exposed. The order in which the risk factors are presented does not reflect the likelihood of their occurrence or the magnitude or significance of the individual risks. Additional risks and uncertainties of which Holdco, Deutsche Börse Group or NYSE Euronext is not currently aware or which Holdco, Deutsche Börse Group and NYSE Euronext do not consider significant at present could likewise have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations. The market price of the Holdco shares could fall if any of these risks were to materialize, in which case investors could lose all or part of their investment.

Risks Relating to the Combination

Because the exchange ratios in the exchange offer and the merger are fixed, the market value of the Holdco shares received by Deutsche Börse shareholders in the exchange offer or the Holdco shares received by NYSE Euronext shareholders in the merger may be less than the market value of the Deutsche Börse shares or NYSE Euronext shares that such holder held prior to the completion of the combination.

Deutsche Börse shareholders who tender their Deutsche Börse shares in the exchange offer will receive one Holdco share for each tendered Deutsche Börse share, and NYSE Euronext shareholders will receive 0.47 of a Holdco share for each of their NYSE Euronext shares in the merger. These exchange ratios are fixed and will not vary even if the market price of Deutsche Börse shares or NYSE Euronext shares varies. The market value of Deutsche Börse shares and NYSE Euronext shares at the time of the completion of the combination may vary significantly from their prices on the date of the business combination agreement, the date of this document, the date on which Deutsche Börse shareholders tender their shares in the exchange offer or the date on which NYSE Euronext shareholders vote on the merger. Because the exchange ratios will not be adjusted to reflect any changes in the market price of the Deutsche Börse shares or NYSE Euronext shares, the value of the consideration paid to the Deutsche Börse shareholders who tender their shares in the exchange offer and to the NYSE Euronext shareholders in the merger may be higher or lower than the market value of their shares on earlier dates.

Changes in share price may result from a variety of factors that are beyond the control of Holdco, Deutsche Börse Group and NYSE Euronext, including their respective business prospects, market conditions, regulatory considerations, governmental actions, legal proceedings and other developments. Market assessments of the benefits of the combination and of the likelihood that the combination will be completed as well as general and industry specific market and economic conditions may also have an adverse effect on share prices.

In addition, it is possible that the combination may not be completed until a significant period of time has passed after the expiration of the offer acceptance period and the NYSE Euronext special meeting. As a result, the market values of the Deutsche Börse shares and NYSE Euronext shares may vary significantly from the date of the expiration of the offer acceptance period and/or NYSE Euronext special meeting to the date of the completion of the combination. In calendar year 2010, the price of Deutsche Börse shares ranged from €45.45 to €59.00, as reported on the Frankfurt Stock Exchange, and the price of NYSE Euronext shares ranged from $22.30 to $34.82, as reported on the New York Stock Exchange, and from €16.23 to €25.81, as reported on

 

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Euronext Paris. Investors are urged to obtain up-to-date prices for Deutsche Börse shares, which are listed on the Frankfurt Stock Exchange under the symbol “DB1,” and NYSE Euronext shares, which are listed on the New York Stock Exchange and Euronext Paris under the symbol “NYX.”

Obtaining required regulatory approvals may prevent or delay completion of the combination or reduce the anticipated benefits of the combination.

Completion of the combination is conditioned upon, among other things, the receipt of material governmental authorizations, consents, orders and approvals, including the approval of competition and antitrust authorities (e.g., the European Commission, the FTC and the DOJ) and securities and other financial regulatory authorities (e.g., BaFin, the SEC, the College of Euronext Regulators and certain European regulators, including the Hessian Exchange Supervisory Authority (Hessisches Ministerium für Wirtschaft, Verkehr und Landesentwicklung), the AMF, the Dutch Minister of Finance, the FSA and the AFM). Holdco, Deutsche Börse and NYSE Euronext intend to pursue all required approvals in accordance with their respective obligations under the business combination agreement. In connection with granting these approvals, the respective governmental or other authorities may impose burdensome conditions on, or require significant divestitures or other changes relating to, the divisions, operations or assets of Deutsche Börse Group or NYSE Euronext. For example, BaFin, the SEC, the FTC, the DOJ and the European Commission and financial regulatory authorities may require changes to the structure of the combination, changes to the governance structure of Holdco or the Holdco articles of association and its subsidiaries, as a precondition to their approval of the combination. In addition, these restrictions may limit the potential to participate in further market consolidation or undertake future acquisitions. None of Holdco, Deutsche Börse or NYSE Euronext can predict what, if any, changes may be required. Certain changes may require NYSE Euronext to obtain the approval of its shareholders and, therefore, to re-solicit proxies, which may result in significant additional expenses and costs. More generally, these and other conditions, divestitures or other changes may prevent or delay completion of the combination or may reduce the anticipated benefits of the combination, which could also have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

The implementation of the post-closing reorganization may be delayed.

Holdco intends as soon as practicable after completion of the exchange offer and the merger to effectuate one or more corporate reorganization transactions, which may include entering (directly and/or through a wholly owned subsidiary) into a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement and/or a squeeze-out transaction. The effectiveness of these agreements and/or the squeeze-out transaction may be delayed for an uncertain time, including, for example, due to shareholder litigation or may not be achievable at all.

Holdco may not be able to successfully integrate the businesses and operations of Deutsche Börse Group and/or NYSE Euronext in a timely fashion or at all.

Deutsche Börse and NYSE Euronext currently operate as independent companies, and will continue to do so until the completion of the combination. Following the combination, Holdco’s management may face significant challenges in integrating the two companies’ businesses, technologies, organizations, procedures, policies and operations, as well as in addressing differences in the business cultures of the two companies, and retaining key Deutsche Börse Group and NYSE Euronext personnel. The integration process may prove to be more complex and time consuming and require more substantial resources and effort than anticipated, which could have a material adverse effect on Deutsche Börse Group’s and NYSE Euronext’s ongoing businesses and relationships with market participants, employees, regulators and others and could also have a material adverse effect on the business and cash flows, financial condition and results of operations of Holdco. In addition, if the integration of Deutsche Börse Group and NYSE Euronext businesses is partially unsuccessful or Holdco does not achieve the expected benefits of the combination as fast or to the extent anticipated by financial analysts or investors, or Holdco’s financial results are not consistent with the expectations of financial analysts or investors, the market price of Holdco shares may decline.

 

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Holdco may fail to realize the anticipated cost savings, growth opportunities and synergies and other benefits anticipated from the combination.

The success of the combination will depend, in part, on Holdco’s ability to realize anticipated cost savings, revenue synergies and growth opportunities from combining the businesses of Deutsche Börse Group and NYSE Euronext. Holdco expects to benefit from operational synergies resulting from the consolidation of capabilities and elimination of redundancies as well as greater efficiencies from increased scale, market integration and automation. Specifically, Deutsche Börse and NYSE Euronext expect that the combined company will achieve annualized cost savings of approximately €300 million (or $400 million) within three years after the combination, principally from the consolidation of information technology, clearing and market operations as well as from the consolidation of corporate administration and support functions. The cost savings are expected to be realized at an annual run rate of 25% by the end of the first year, 50% by the end of the second year and 100% by the end of the third year following the completion of the combination.

Deutsche Börse and NYSE Euronext also expect that the combination will create at least €100 million (or $133 million) in revenue synergies annually after the combination through cross-selling and distribution opportunities, increased turnover from liquidity pool consolidation and new products, a progressive introduction of Deutsche Börse Group’s clearing capabilities and expanded scope for technology services and market data offerings.

There is a risk, however, that the businesses of Deutsche Börse Group and NYSE Euronext may not be combined in a manner that permits these costs savings and revenue synergies to be realized in the time currently expected, or at all. For example, the completion of the combination may be delayed, challenged by parties opposing the completion of the combination or may not be possible at all, or necessary approvals might require certain commitments or undertakings regarding operations or employees. This may limit or delay the ability of Holdco’s management to integrate the two companies’ technologies, organizations, procedures, policies and operations. In addition, a variety of factors, including but not limited to wage inflation, currency fluctuations and difficulty integrating technology platforms, may adversely affect Holdco’s anticipated cost savings and revenues. Also, the combined company must achieve its anticipated cost savings without adversely affecting its revenues. If Holdco is not able to successfully achieve these objectives, the anticipated benefits of the combination may not be realized fully, or at all, or may take longer to realize than expected, which could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Holdco, Deutsche Börse Group and NYSE Euronext will incur significant transaction and combination-related costs in connection with the combination, some of which are payable regardless of whether the combination is completed.

Holdco, Deutsche Börse and NYSE Euronext expect to incur a number of non-recurring implementation and restructuring costs associated with combining the operations of the two companies. In addition, Deutsche Börse Group and NYSE Euronext will incur legal, accounting and other transaction fees and other costs related to the combination. Some of these costs are payable regardless of whether the combination is completed. Additional costs substantially in excess of currently anticipated costs may also be incurred in the integration of the businesses of Deutsche Börse Group and NYSE Euronext.

Although Holdco expects that the cost savings, as well as the realization of other efficiencies related to the integration of the businesses, will offset these transaction- and combination-related costs over time, this net benefit may not be achieved in the near term, or at all. In addition, the timeline in which cost savings should be reached is lengthy. Failure of Holdco to realize these efficiencies in a timely manner or at all could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Upon completion of the combination, certain change-of-control rights under material agreements may be triggered.

Deutsche Börse and NYSE Euronext are parties to agreements that contain change-of-control provisions that may be triggered upon completion of the combination. Upon the triggering of these change-of-control provisions,

 

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the counterparties to the agreement may be able to exercise certain rights that have a negative effect on Deutsche Börse, NYSE Euronext or, after the combination, Holdco and their respective subsidiaries. For example, there are change-of-control provisions contained in Deutsche Börse’s cooperation agreement with SIX Group AG regarding Scoach Holding S.A. and the shareholders’ agreement with SIX Swiss Exchange AG regarding Eurex. There are also change-of-control provisions contained in NYSE Euronext’s credit agreements and the indentures governing its outstanding notes. If the counterparty to these agreements were to exercise their rights as a result of these change-of-control or other provisions, Holdco could face detrimental consequences, depending on the particular change-of-control right, which could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Uncertainties associated with the combination may cause a loss of management personnel and other key employees, which could materially adversely affect the business and results of operations of Holdco.

Deutsche Börse Group and NYSE Euronext are dependent on the experience and industry knowledge of their respective management personnel and other key employees to operate their businesses and execute their business plans, particularly in the area of information technology. There is a shortage in the employment market for specialists in the information technology field, and Deutsche Börse Group and NYSE Euronext compete for employees with a large number of other enterprises in the information technology industry. Holdco’s success following the combination will depend in part upon its ability to attract and retain management personnel and other key employees. Current and prospective employees of Deutsche Börse Group and NYSE Euronext may experience uncertainty about their roles within the combined company following the combination, which may adversely affect the ability of Holdco to attract or retain management personnel and other key employees. A loss of management personnel or other key employees could materially adversely affect Holdco’s business and cash flows, financial condition and results of operations.

Holdco has no operating or financial history and results of operations may differ significantly from the unaudited pro forma financial data included in this document.

Holdco has been recently incorporated and has no operating history and no revenues. This document includes unaudited pro forma financial data for Holdco as if the combination had occurred as of January 1, 2010. The pro forma financial information is presented for illustrative purposes only, is based on certain assumptions, addresses a hypothetical situation and only covers one financial year. Therefore, it does not necessarily indicate the results of operations or the combined financial position that would have resulted had the combination been completed at the beginning of the period presented, nor is it indicative of the results of operations in future periods or the future financial position of the combined businesses. In particular, it does not reflect benefits of expected costs savings or revenue opportunities with respect to the combination nor the costs to achieve such savings or opportunities. Accordingly, Holdco’s results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma financial data included in this document.

Failure to complete the combination could negatively affect the prices of the Deutsche Börse shares and the NYSE Euronext shares and the future businesses and financial results of Deutsche Börse Group and NYSE Euronext.

If the combination is not completed, the ongoing businesses of Deutsche Börse Group and/or NYSE Euronext may be adversely affected, and Deutsche Börse Group and NYSE Euronext will be subject to a number of risks, including the following:

 

   

being required to pay a termination fee of €250 million under certain circumstances provided in the business combination agreement or having to pay certain costs relating to the combination, such as legal, accounting and other transactions fees; and

 

   

having had the focus of the management of Deutsche Börse Group and NYSE Euronext on the combination instead of on pursuing other business opportunities that could have been beneficial to the respective company.

 

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If the combination is not completed, these risks may materialize and could have a material adverse effect on the business and cash flows, financial condition and results of operations of Deutsche Börse Group or NYSE Euronext.

The rights and responsibilities of the shareholders of Holdco will be governed by Dutch law and Holdco’s articles of association, which will differ in some respects from the rights and responsibilities of shareholders under German or Delaware law and the current organizational documents of Deutsche Börse and NYSE Euronext.

Following the completion of the combination, Holdco’s corporate affairs will be governed by its articles of association and the laws governing companies incorporated in the Netherlands. The rights of Holdco’s shareholders and the responsibilities of members of the Holdco board of directors under Dutch law will differ from the rights of shareholders and the responsibilities of a company’s board of directors under German law or the laws of Delaware.

For example, Holdco’s articles of association will also provide that each of the Holdco directors designated by NYSE Euronext and Deutsche Börse, respectively, prior to completion of the combination will be nominated by the Holdco board of directors for re-election pursuant to a binding nomination at each of the annual general meetings of shareholders in 2012, 2013 and 2014 (and, additionally, 2015 in the case of the Holdco group chairman and the Holdco group chief executive director). Under Dutch law, binding nominations may only be overridden by a shareholder resolution passed by a two-thirds majority of the votes cast, with such votes representing more than one-half of Holdco’s issued capital. Alternatively, if Holdco determines that it is a “foreign private issuer” and is not otherwise required by applicable law, regulation or stock exchange listing standards to hold annual director elections, then the initial members of the Holdco board of directors will be appointed to serve on the board for a term that expires at the Holdco annual general shareholders meeting in 2015 (or in 2016 in the case of the Holdco group chairman and the Holdco group chief executive officer). By contrast, the current amended and restated bylaws of NYSE Euronext provide that directors of NYSE Euronext are elected by the vote of a majority of the votes cast at a meeting at which a quorum is present, except that a plurality voting standard applies in the case of a contested election. The provisions of Dutch corporate law and Holdco’s articles of association have the effect of concentrating control over certain corporate decisions and transactions in the hands of the Holdco board of directors. As a result, holders of Holdco shares may have more difficulty in protecting their interests in the face of actions by members of the Holdco board of directors than if Holdco were incorporated in Germany or Delaware. Dutch law also requires that in the performance of its duties, the Holdco board of directors will need to consider the interests of Holdco, and its shareholders, employees and other stakeholders, and it is possible that some of these parties will have interests that differ from, or are in addition to, the interests of the shareholders of Holdco.

It may be difficult for holders of Holdco shares who are not familiar with Dutch corporate law and market practice to exercise their shareholder rights due to foreign legal concepts, language and customs. In addition, shareholder meetings of Holdco will be held in the Netherlands, and it may therefore be expensive and otherwise burdensome to attend these meetings in person (for those shareholders who prefer to vote in person rather than sending a proxy), in particular for shareholders who reside outside of the Netherlands. These aspects could have a material adverse effect on the value of Holdco’s shares and could materially impact the rights of Holdco shareholders.

U.S. civil liabilities may not be enforceable.

Holdco is organized under the laws of the Netherlands and substantial portions of its assets will be located outside of the United States. In addition, certain members of the Holdco board of directors, the Deutsche Börse supervisory board and the NYSE Euronext board of directors, and certain members of the Deutsche Börse management board and the respective officers of NYSE Euronext and Holdco, as well as certain experts named herein reside outside the United States. As a result, it may be difficult for investors to effect service of process

 

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within the United States upon Holdco, Deutsche Börse or such other persons residing outside the United States, or to enforce outside the United States judgments obtained against such persons in U.S. courts in any action, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. In addition, it may be difficult for investors to enforce, in original actions brought in courts in jurisdictions located outside the United States, rights predicated upon the U.S. federal securities laws.

The United States and the Netherlands currently do not have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitral awards) in civil and commercial matters, and a final judgment for the payment of money rendered by any federal or state court in the United States which is enforceable in the United States, whether or not predicated solely upon U.S. federal securities laws, would not automatically be recognized or enforceable in the Netherlands. In order to obtain a judgment which is enforceable in the Netherlands, the party in whose favor a final and conclusive judgment of the U.S. court has been rendered will be required to file its claim with a court of competent jurisdiction in the Netherlands. Such party may submit to the Dutch court the final judgment rendered by the U.S. court. If and to the extent that the Dutch court finds that the jurisdiction of the U.S. court has been based on grounds which are internationally acceptable and that proper legal procedures have been observed, the Dutch court will, in principle, give binding effect to the judgment of the court of the United States without substantive re-examination or re-litigation on the merits of the subject matter thereof, unless such judgment contravenes principles of public policy of the Netherlands.

Based on the foregoing, there can be no assurance that U.S. investors will be able to enforce against Holdco or members of its board of directors, officers or certain experts named herein who are residents of the Netherlands or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

In addition, there is doubt as to whether a Dutch court would accept jurisdiction and impose civil liability on Holdco, the members of its board of directors, its officers or certain experts named herein in an original action predicated solely upon the U.S. federal securities laws brought in a court of competent jurisdiction in the Netherlands against Holdco or such members, officers or experts, respectively.

Deutsche Börse shareholders and NYSE Euronext shareholders will have a reduced ownership and voting interest after the combination and will exercise less influence over management.

After the completion of the combination, the Deutsche Börse shareholders and NYSE Euronext shareholders will own a smaller percentage of Holdco than they currently own of Deutsche Börse and NYSE Euronext, respectively. Upon completion of the combination, and assuming that all of the outstanding Deutsche Börse shares are exchanged in the exchange offer, former Deutsche Börse shareholders and former NYSE Euronext shareholders will own approximately 60% and 40%, respectively, of the outstanding Holdco shares immediately after the combination. Consequently, Deutsche Börse shareholders, as a group, will have reduced ownership and voting power in the combined company compared to their ownership and voting power in Deutsche Börse, and NYSE Euronext shareholders, as a group, will have reduced ownership and voting power in the combined company compared to their ownership and voting power in NYSE Euronext. Furthermore, the business combination agreement and the relevant organizational documents of Holdco will provide for the composition of the Holdco board of directors and the Global Executive Committee, management and the allocation of management positions between Deutsche Börse and NYSE Euronext only for certain time periods (i.e., four years after completion of the combination for the composition of the Global Executive Committee and management, until the annual general meeting of Holdco shareholders in 2015 for the composition of the Holdco board of directors and until the annual general meeting of Holdco shareholders in 2016 for the positions of the Holdco group chairman and the Holdco group chief executive officer). After those time periods, the respective positions may change.

 

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If Deutsche Börse shareholders do not tender their Deutsche Börse shares in the exchange offer, the consideration that Deutsche Börse shareholders may receive at a later point in time may substantially differ in form and/or value from the consideration that they would have received had they tendered their Deutsche Börse shares in the exchange offer, and they may also be subject to additional taxes.

As soon as possible after the completion of the combination, Holdco intends to effectuate a post-completion reorganization of Deutsche Börse Group that is intended to result in Deutsche Börse becoming a wholly owned subsidiary of or otherwise controlled by Holdco.

In the event that Holdco holds, directly or indirectly, 75% or more of the outstanding Deutsche Börse shares after the completion of the exchange offer or any time thereafter, Holdco intends to enter (directly and/or through a wholly owned subsidiary) into a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement pursuant to which Deutsche Börse would become subject to instructions that may be given by the controlling party and/or would become obliged to transfer all of its profits and losses to the controlling party. As a consequence, the remaining Deutsche Börse shareholders will be offered Holdco shares as consideration pursuant to Section 305 para. 2 of the German Stock Corporation Act in exchange for their Deutsche Börse shares. In the case of a domination agreement, the remaining Deutsche Börse shareholders will be entitled to a variable or fixed guaranteed minimum dividend pursuant to the German Stock Corporation Act. In the case of a domination and profit and loss transfer agreement, all annual profits of Deutsche Börse will be transferred to the controlling company with the remaining Deutsche Börse shareholders being entitled to receive a variable or fixed annual compensation payment (Ausgleichszahlung) pursuant to the German Stock Corporation Act. Such fixed or variable annual compensation payment might be lower than the dividend payments such remaining Deutsche Börse shareholders would receive were the annual profits distributed to all Deutsche Börse shareholders on a pro rata basis.

Alternatively or in addition to a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement, in the event that Holdco holds, directly or indirectly, 95% or more of the outstanding Deutsche Börse shares after the completion of the exchange offer or any time thereafter, to effectuate the post-completion reorganization, Holdco expects to undertake a squeeze-out transaction as a result of which all Deutsche Börse shares of the remaining Deutsche Börse shareholders would be transferred to Holdco by operation of law with such remaining shareholders being entitled to receive adequate consideration in exchange for their Deutsche Börse shares transferred as a result of the squeeze-out. In the case of a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act, the consideration must be in cash. If the squeeze-out is performed by applying for a court order in accordance with Sections 39a et seq. of the German Takeover Act, Holdco is required to offer Holdco shares and cash as consideration to the remaining Deutsche Börse shareholders. The consideration that Deutsche Börse shareholders receive in the squeeze-out may differ in value and/or form from the consideration that they would have received, had they tendered their Deutsche Börse shares in the exchange offer, and Deutsche Börse shareholders may also be subject to additional taxes. In the event that the Holdco shares lose value after the completion of the combination, there is no obligation of Holdco to pay to the Deutsche Börse shareholders who did not tender their shares the higher implied value received by the Deutsche Börse shareholders who tendered their shares in the exchange offer. In addition, Deutsche Börse shareholders who are required to tender their shares in the squeeze-out may be subject to additional taxes.

In the context of a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act (Aktiengesetz), the following should further be noted: The German legislator is currently preparing a new legislation called Third Amendment of the Act on Corporate Reorganisations (Drittes Gesetz zur Änderung des Umwandlungsgesetzes) which is expected to come into force still in 2011. The draft of such new legislation presented by the German federal government and dated October 1, 2010 (BT-Drucks 17/3122) provides, among other things, for the possibility to perform, under certain circumstances, a special form of a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act (Aktiengesetz) upon request of a principal shareholder holding at least 90% of the share capital of a German stock corporation (instead of 95% as required under the standard form of a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act (Aktiengesetz)). Holdco reserves the right to assess and possibly perform

 

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(as the case may be, also through a subsidiary) such special form of a squeeze-out transaction pursuant to Section 327a et seq. of the German Stock Corporation Act (Aktiengesetz) in relation to Deutsche Börse following a completion of the exchange offer, if such new legislation is implemented and the prerequisites for such special form of a corporate squeeze-out are met.

Shareholders of Deutsche Börse not participating in the exchange offer will be diluted due to the obligation of Deutsche Börse to tender its treasury shares in the exchange offer.

Deutsche Börse currently holds approximately 4.59% (8,956,997 shares) of its share capital in treasury shares. Deutsche Börse is prohibited from exercising any rights inherently connected with these treasury shares. In the business combination agreement, Deutsche Börse agreed to tender these treasury shares in the exchange offer. After the completion of the exchange offer, Holdco may — in contrast to Deutsche Börse prior to completion of the exchange offer — exercise those rights (e.g., voting rights at shareholders’ meetings) inherently connected to those shares, thereby diluting the Deutsche Börse shareholders who do not tender their Deutsche Börse shares in the exchange offer.

If, following the completion of the exchange offer, some Deutsche Börse shares remain outstanding, then the liquidity and market value of those shares could be materially adversely affected.

If the completion of the exchange offer occurs, but not all the outstanding Deutsche Börse shares have been tendered, then the free float in Deutsche Börse shares will be significantly lower than the current free float in Deutsche Börse shares, thereby reducing the liquidity of the remaining Deutsche Börse shares. Reduced liquidity could make it more difficult for the remaining Deutsche Börse shareholders to sell their shares and could materially adversely affect the market value of those remaining shares. A lower level of liquidity in the trading in Deutsche Börse shares could result in greater price fluctuations of Deutsche Börse shares than in the past. Moreover, memberships in certain stock exchange indices, in particular in the DAX or the EUROSTOXX50, could change as a result of a lower free float. In addition, in the event that Holdco holds, directly or indirectly, 75% or more of the outstanding Deutsche Börse shares after the completion of the exchange offer or any time thereafter, Holdco intends to enter (directly and/or through a wholly owned subsidiary) into a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement with Deutsche Börse pursuant to which the remaining Deutsche Börse shareholders would have significantly limited rights, including, in the case of a profit and loss transfer agreement, a limited ability to participate in the profits of Deutsche Börse, which could also materially adversely affect the market value of the remaining Deutsche Börse shares.

Furthermore, the value of the Deutsche Börse shares implied by the exchange offer does not guarantee that the value of the Deutsche Börse shares not held by Holdco following the completion of the exchange offer will remain at that level or exceed that value in the future. The share price may vary materially in the future.

Risks Relating to the Businesses of Holdco, Deutsche Börse Group and NYSE Euronext

Insufficient systems capacity and systems failures could adversely affect Deutsche Börse Group’s and NYSE Euronext’s businesses.

Deutsche Börse Group’s and NYSE Euronext’s businesses depend on the performance and reliability of complex computer and communications systems, including upgrades. Heavy use of platforms and order routing systems during peak trading times or at times of unusual market volatility could cause Deutsche Börse Group’s and NYSE Euronext’s systems to operate slowly or even to fail for periods of time. Failure to maintain systems, ensure security or to ensure sufficient capacity may also result in a temporary disruption of their regulatory and reporting functions.

Deutsche Börse Group and NYSE Euronext have experienced systems failures in the past, and it is possible that they will experience systems failures in the future. Systems failures could be caused by, among other things, periods of insufficient capacity of network bandwidth, power or telecommunications failures, acts of God or war,

 

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terrorism, human error, natural disasters, fire, sabotage, hardware or software malfunctions or defects, computer viruses, intentional acts of vandalism and similar events over which they have little or no control. Deutsche Börse Group and NYSE Euronext also rely on third parties for systems support. Any interruption in these third-party services or deterioration in the performance of these services could also be disruptive to their businesses. In addition, Deutsche Börse Group’s and NYSE Euronext’s systems may be adversely affected by failures of other trading systems, as a result of which they may be required to suspend trading activity in particular financial instruments or, under certain circumstances, unwind trades.

In the event that any of their systems, or those of their third-party service providers, fail or operate slowly, it may cause any of the following to occur: unanticipated disruptions in service to exchange members and clients, slower response times or delays in trade executions, incomplete or inaccurate recording or processing of trades, financial losses and liabilities to clients and litigation or other claims against Deutsche Börse Group and NYSE Euronext.

If Deutsche Börse Group or NYSE Euronext cannot expand system capacity to handle increased demand, or if their systems otherwise fail to perform and they experience disruptions in service, slower response times or delays in introducing new products and services, then Deutsche Börse Group and NYSE Euronext could incur reputational damage, regulatory sanctions, litigation, loss of trading share, loss of trading volume and loss of revenues, any of which could also have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Deutsche Börse Group and NYSE Euronext operate in a business environment that continues to experience significant and rapid technological change.

Technology is a key component of Deutsche Börse Group’s and NYSE Euronext’s business strategy and is crucial to their success. Deutsche Börse Group and NYSE Euronext seek to offer market participants a comprehensive suite of best-in-class technology solutions in a centralized environment. However, Deutsche Börse Group and NYSE Euronext operate in a business environment that has undergone, and continues to experience, significant and rapid technological change. In recent years, electronic trading and customer demand for increased choice of execution methods has grown significantly. To remain competitive, Deutsche Börse Group and NYSE Euronext must continue to enhance and improve the responsiveness, functionality, capacity, accessibility and features of their trading platforms, software, systems and technologies. Their success will depend, in part, on their ability to develop and license leading technologies, enhance existing trading, clearing and settlement platforms and services and create new platforms and services. Furthermore, they need to respond to customer demands, technological advances and emerging industry standards and practices on a cost-effective and timely basis, and continue to attract and retain highly skilled technology staff to maintain and develop existing technology and to adapt to and manage emerging technologies.

The development and expansion of electronic trading, clearing, settlement, custody, collateral management and market data-related technologies entail significant technological, financial and business risks. These risks include Deutsche Börse Group and NYSE Euronext failing or being unable to provide reliable and cost-effective electronic services to their customers, timely developing the required functionality to support electronic trading in key products comparable to systems on other electronic markets, matching fees of their competitors that offer electronic-only trading facilities, attracting independent software vendors to write front-end software that will effectively access Deutsche Börse Group’s and NYSE Euronext’s electronic trading systems and automated order routing systems, responding to technological developments or service offerings by competitors and generating sufficient revenue to justify the substantial capital investment Deutsche Börse Group and NYSE Euronext have made and will continue to make enhancements to their electronic trading platforms, as well as their clearing and settlement systems.

The adoption of new technologies or market practices may require Deutsche Börse Group and NYSE Euronext to devote additional resources to improve and adapt their services. For example, the growth of algorithmic and so called “black box trading” requires Deutsche Börse Group and NYSE Euronext to increase

 

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systems and network capacity to ensure that increases in message traffic can be accommodated without an adverse effect on system performance. In addition, the growth of electronic trading requires Deutsche Börse Group and NYSE Euronext to develop their electronic trading systems to include additional products and markets, and enhance their functionality, performance, capacity, reliability and speed. Keeping pace with increasing requirements can be expensive, and Deutsche Börse Group and NYSE Euronext cannot be sure that they will succeed in making these improvements to their technology infrastructure in a timely manner or at all.

If Deutsche Börse Group and NYSE Euronext are unable to anticipate and respond to the demand for new services, products and technologies on a timely and cost-effective basis and to adapt to technological advancements and changing standards, they may be unable to compete effectively. Further, Deutsche Börse Group and NYSE Euronext rely on the ability of their customers to have the necessary front and back office functionality to support any new products and trading and clearing functionality of Deutsche Börse Group and NYSE Euronext. To the extent their customers are not prepared and/or lack the resources or infrastructure, the success of any new initiatives may be compromised. Moreover, Holdco may incur substantial development, sales and marketing expenses and expend significant management effort to add new products or services to Deutsche Börse Group’s and NYSE Euronext’s trading platforms. Even after incurring these costs, Deutsche Börse Group and NYSE Euronext ultimately may not realize any, or may realize only small amounts of, revenues for these new products or services. Consequently, if revenue does not increase in a timely fashion as a result of these expansion initiatives, the up-front costs associated with expansion may exceed revenue and reduce Holdco’s income.

Any failure or delay in exploiting technology, or failure to exploit technology as effectively as competitors of Deutsche Börse Group and NYSE Euronext, could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Service deficiency in Deutsche Börse Group’s and NYSE Euronext’s manual data processing could result in losses.

Deutsche Börse Group and NYSE Euronext rely mostly on automated data processing. However, not all of the data processing is automated and manual data processing in relation to certain services rendered to its customers is required. Therefore, operator errors or omissions may occur that relate mainly to manual input of data (e.g., incorrect processing of customer instructions in the custody business). As a result, Deutsche Börse Group and NYSE Euronext remain exposed in certain business segments to the risk of inadequate handling of customer instructions. In addition, manual intervention in market and system management is necessary in certain cases. The manual intervention and data processing may lead to mistakes, which could have a material adverse effect on Deutsche Börse Group’s, NYSE Euronext’s and therefore on Holdco’s business and cash flows, financial condition and results of operations.

A failure to protect Deutsche Börse Group’s and NYSE Euronext’s intellectual property rights, or allegations that Deutsche Börse Group and/or NYSE Euronext have infringed intellectual property rights of others, could adversely affect Holdco’s business.

Deutsche Börse Group and NYSE Euronext own or license rights to a number of trademarks, service marks, trade names, copyrights and patents that they use in their businesses, including exclusive rights to use certain indices as the basis for equity index derivatives products traded on their futures markets. To protect their intellectual property rights, Deutsche Börse Group and NYSE Euronext rely on a combination of trademark laws, copyright laws, patent laws, trade secret protection, confidentiality agreements and other contractual arrangements with affiliates, customers, strategic investors and others. The protective steps taken may be inadequate to deter misappropriation of their intellectual property. Deutsche Börse Group and NYSE Euronext may be unable to detect the unauthorized use of, or take appropriate steps to enforce, their intellectual property rights. For example, in its market data & analytics business, Deutsche Börse Group makes its products available to customers on a periodic subscription basis. Although license agreements limit the right of customers to copy or

 

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publicly disclose data, customers could nevertheless make unauthorized copies or publicly disclose the information. As a result, the market data & analytics business could lose potential new subscribers due to the fact that the data is freely available. Furthermore, some of the products and processes of Deutsche Börse Group and NYSE Euronext may not be subject to intellectual property protection. Competitors of Deutsche Börse Group and NYSE Euronext may also independently develop and patent or otherwise protect products or processes that are the same or similar to the products or processes of Deutsche Börse Group and NYSE Euronext. Failure to protect intellectual property adequately could harm Deutsche Börse Group’s and NYSE Euronext’s reputation and affect their ability to compete effectively. Further, defending intellectual property rights may require significant financial and managerial resources, the expenditure of which could also have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Third parties may assert intellectual property rights claims against Deutsche Börse Group and/or NYSE Euronext, which may be costly to defend, could require the payment of damages and could limit Deutsche Börse Group’s and/or NYSE Euronext’s ability to use certain technologies, trademarks or other intellectual property. Some of Deutsche Börse Group’s and NYSE Euronext’s competitors currently own patents and have actively been filing patent applications in recent years, some of which may relate to their trading platforms and business processes. As a result, Deutsche Börse Group and NYSE Euronext may face allegations that they have infringed or otherwise violated the intellectual property rights of third parties. Any intellectual property rights claims, with or without merit, could be expensive to litigate or settle and could divert management resources and attention. Successful challenges against Deutsche Börse Group and/or NYSE Euronext could require them to modify or discontinue their use of technology or business processes where such use is found to infringe or violate the rights of others, or require Deutsche Börse Group and/or NYSE Euronext to purchase licenses from third parties, any of which could also have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Deutsche Börse Group and NYSE Euronext face significant competition and compete globally with a broad range of market participants for listings, trading, clearing and settlement volumes. Increasing competition could result in a decrease of their trading volumes and revenues.

The securities industry, including listings, trade execution, clearing and settlement of cash equities, bonds and derivatives, is highly competitive. Deutsche Börse Group and NYSE Euronext face significant competition for listings, trading, clearing and settlement of equities, fixed income securities, repos, exchange-traded funds, closed-end funds, structured products, futures, options and other derivatives. Holdco expects competition in the securities industry to increase further and that new competitors will enter the industry. For example, the central securities depository settlement services of Clearstream may face increased competition from the emerging central European settlement infrastructure TARGET2-Securities. Competitors and new entrants may be subject to less stringent regulatory oversight than Deutsche Börse Group and NYSE Euronext currently face. Increased competition from existing and new competitors could, for example, cause Deutsche Börse Group and NYSE Euronext to experience a decline in their market share of listings, trading, clearing and settlement activity. Such a decline could cause Deutsche Börse Group and NYSE Euronext to lose the associated transaction fees and, in particular for its U.S. business, a proportionate share of market data fees or other revenue sources.

Sustained trends toward the liberalization, technological innovation and globalization of world capital markets have resulted in greater mobility of capital, greater international participation in local markets and more competition among markets in different geographical areas. The financial infrastructure industry has undergone significant consolidation through mergers, acquisitions and major alliances globally in recent years. For example, in 2007, the International Securities Exchange Holdings, Inc. was acquired by Eurex, a derivatives exchange jointly owned by Deutsche Börse and SIX Swiss Exchange, NYSE Group Inc. and Euronext N.V. combined to form NYSE Euronext, the IntercontinentalExchange acquired the New York Board of Trade, Nasdaq merged with OMX, the Chicago Mercantile Holdings, Inc. and CBOT Holdings, Inc. completed their merger to form CME Group, Inc., and the London Stock Exchange and Borsa Italiana completed their merger. In 2008, CME Group merged with the New York Mercantile Exchange, the Vienna Stock Exchange acquired a majority stake in

 

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each of the Budapest, Ljubljana and Prague exchanges, and the following year, formed the CEE Stock Exchange Group, which is expected to implement a shared transaction platform among its exchanges. In February 2010, the London Stock Exchange acquired a majority stake in Turquoise. In late 2010, the Singapore Stock Exchange announced its offer to buy ASX Limited, and, in 2011, other significant transactions have been announced, including Lima Stock Exchange’s combination with Bolsa de Valores de Colombia, London Stock Exchange Group’s merger with TMX Group and BATS Global Markets’ acquisition of Chi-X Europe. As a result of these combinations, and as a result of new entrants entering the industry, global competition among listing venues, trading markets and other execution venues as well as among clearing service providers has become more intense. The global derivatives industry has become increasingly competitive. Exchanges, intermediaries, and even end users are consolidating and over-the-counter and unregulated entities are constantly evolving. Additionally, in response to growing competition, many marketplaces in both Europe and the United States have demutualized to provide greater flexibility for future growth.

The current and prospective competitors of Deutsche Börse Group and NYSE Euronext include both traditional and non-traditional execution and listing venues, securities and securities option exchanges, futures exchanges, over-the-counter markets, clearing organizations, market data and information vendors, electronic communications networks, multilateral trading facilities, crossing systems and similar entities, consortia of large customers, consortia of clearing firms and electronic brokerage and dealing facilities, market makers, banks, index providers, financial services technology and other financial market participants. Some of these competitors are also among the largest customers of Deutsche Börse Group and NYSE Euronext. Deutsche Börse Group and NYSE Euronext face significant and growing competition from financial institutions that have the ability to divert trading and/or clearing volumes from Deutsche Börse Group’s and NYSE Euronext’s exchanges and clearing houses. For example, banks and brokers may also enter into bilateral trading arrangements and/or create Broker Crossing Networks by matching their respective order flows, or may “internalize” order flow by assuming the role of principal and acting as counterparty to orders originating from retail investors, in each case depriving Deutsche Börse Group and NYSE Euronext of potential trading volumes. Deutsche Börse Group and NYSE Euronext compete with other market participants in a variety of ways, including the cost, quality and speed of trade execution, liquidity, functionality, ease of use and performance of trading systems, the ranges of products and services offered to trading participants and listed companies, technological innovation and reputation. In particular, Deutsche Börse Group’s and NYSE Euronext’s competitors may exploit regulatory disparities between traditional, regulated exchanges and alternative markets that benefit from a reduced regulatory burden and lower-cost business model or consolidate and form alliances, which may create greater liquidity, lower costs, and better pricing than Deutsche Börse Group or NYSE Euronext can offer; and better leverage existing relationships with customers and alliance partners or better exploit brand names to market and sell their services.

The importance of technology to the financial infrastructure industry may continue to foster a growing competitive environment due to the global nature of the numerous competitors, ability for new upstarts to emerge and existing competitors’ to rapidly innovate. Deutsche Börse and NYSE Euronext further believe that they may also face competition from large computer software companies and media and technology companies. The number of businesses providing Internet-related financial services is rapidly growing. Other companies have entered into or are forming joint ventures or consortia to provide services similar to those provided by Deutsche Börse Group and NYSE Euronext. Other technology companies may become even stronger competitors through acquisitions.

Failure of Holdco to compete successfully could have a material adverse effect on its business, cash flows, financial condition and results of operations.

Holdco’s business may be adversely affected by intense price competition.

The securities industry, including listings, trade execution, clearing and settlement of cash equities, bonds and derivatives, is characterized by intense price competition. In particular, the pricing model for listings, trade execution, clearing and settlement has changed in response to competitive market conditions. In recent years, some of Deutsche Börse Group’s and NYSE Euronext’s competitors have engaged in aggressive pricing

 

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strategies, including lowering the fees that they charge for taking liquidity and increasing liquidity (or rebates) they provide as an incentive for providers of liquidity in certain markets. It is likely that Deutsche Börse Group and NYSE Euronext will continue to experience significant pricing pressure and that some of their competitors will seek to increase their share of listings, trading or clearing by reducing their fees, by offering larger liquidity payments or by offering other forms of financial or other incentives.

For example, Holdco could lose a substantial percentage of its share of trading or listings if it is unable to price transactions in a competitive manner. Profit margins could also decline if Holdco reduces pricing in response, particularly in light of the substantially fixed cost nature of Deutsche Börse Group’s and NYSE Euronext’s respective trading and clearing businesses. Furthermore, other business segments of Deutsche Börse Group may also face intense price competition, such as from the emerging central European settlement infrastructure, TARGET2-Securities, with respect to Clearstream’s central securities depository settlement services. In addition, a decrease in the market share in the listing and trading businesses as a result of price pressure could adversely impact other business segments, such as Deutsche Börse Group’s market data & analytics business. Deutsche Börse Group also might be forced to lower its subscription fees for instruments listed on Xetra or Eurex due to competitors offering similar services at lower prices or for free. In addition, one or more competitors may engage in aggressive pricing strategies in the future and significantly decrease or completely eliminate their profit margin for a period of time in order to capture a greater share of listings, trading or clearing market share. Furthermore, many internalization strategies are driven by cost-saving or profit incentive, thus further increasing the desire for Deutsche Börse Group’s and NYSE Euronext’s customers to avoid incurring fees on its exchanges or clearing houses. Deutsche Börse Group’s, NYSE Euronext’s and also Holdco’s results of operations and future profitability could be adversely affected as a result of these activities.

A change in the policy of the administrative bodies of the exchanges in Germany could reduce Deutsche Börse Group’s revenue.

As an exchange operator in Germany, Deutsche Börse Group also generates income from statutory fees established by independent administrative bodies of the Frankfurt Stock Exchange and Eurex Deutschland. A change in the fee policy of the independent administrative bodies of the exchanges, or the discontinuation of certain types of fees previously charged, could reduce Deutsche Börse Group’s revenues and could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Adverse economic conditions could negatively affect Holdco’s business and cash flows, financial condition and results of operations.

General economic conditions affect the overall level of trading activity and new listings in securities markets, which directly impact Deutsche Börse Group’s and NYSE Euronext’s results of operations. A significant portion of Holdco’s revenue will depend, either directly or indirectly, on transaction-based fees that, in turn, depend on Deutsche Börse Group’s and NYSE Euronext’s ability to attract and maintain order flow, both in absolute terms and relative to other market centers. Adverse economic conditions may result in a deterioration of the economic success of the companies listed on Holdco’s exchanges and hence a decline in trading volume and demand for market data and a decrease of asset-based fees, which may adversely affect Holdco’s revenues and future growth. Declines in volumes may impact Deutsche Börse Group’s and NYSE Euronext’s market share or pricing structures. Poor economic conditions may also negatively impact new listings by reducing the number or size of securities offerings. In the recent financial crisis, both Deutsche Börse Group and NYSE Euronext experienced reduced trading and clearing volumes and fewer listings, resulting in decreased revenues in those segments of their respective businesses.

Deutsche Börse Group and NYSE Euronext also generate revenues from listing fees, clearing and transaction fees. Poor economic conditions, industry-specific circumstances, capital and financial market trends and regulatory requirements may also negatively impact new listings by reducing the number or size of securities offerings. A lack of investor confidence in the financial markets could also have a negative effect on Deutsche

 

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Börse Group’s and NYSE Euronext’s financial performance. Recent global market and economic conditions have been difficult and volatile, in particular for financial services companies that are Deutsche Börse Group’s and NYSE Euronext’s most significant customers. These conditions have resulted in significantly increased volatility, outflows of customer funds and securities, losses resulting from declining asset values, defaults on securities and reduced liquidity. While volatile markets can generate increased transaction volume, prolonged recessionary conditions can adversely affect trading volumes and the demand for market data, and can lead to slower collections of accounts receivable as well as increased counterparty risk. Deutsche Börse Group has experienced a decline in subscriptions for its market data as a result of the consolidation of its customers and employee layoffs by many of its customers. In the event of a significant and sustained decline in trading and/or clearing volumes, including a reduction in the number of traders, reduced trading demand by customers of Deutsche Börse Group and NYSE Euronext or a decision by regulators or market participants to curtail speculative trading, Deutsche Börse Group and NYSE Euronext would lose revenue, and their inability to quickly reduce infrastructure and overhead expenses could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

During 2009 and 2010, companies in many different industries found it difficult to borrow money from banks and other lending sources, and also experienced difficulty raising funds in the capital markets. While access to credit markets has improved, the upheaval in the credit markets continues to impact the economy. While neither Deutsche Börse Group nor NYSE Euronext has experienced reductions in its borrowing capacity, lenders in general have taken actions that indicate their concerns regarding liquidity in the marketplace. These actions have included reduced advance rates for certain security types, more stringent requirements for collateral eligibility and higher interest rates. Should lenders continue to take additional similar actions, the cost of conducting Holdco’s businesses may increase and Holdco’s ability to implement its business initiatives could be limited. In addition, Holdco’s ability to raise financing could be impaired if rating agencies, lenders or investors develop a negative perception of its long-term or short-term financial prospects, or of prospects for the industries in which it operates, which could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Broad market trends and other factors beyond the control of Deutsche Börse Group and NYSE Euronext could significantly reduce demand for their services.

Deutsche Börse Group’s and NYSE Euronext’s business, cash flows and results of operations are highly dependent upon the levels of activity on their exchanges and clearing houses, and in particular, upon the volume of financial instruments traded and/or cleared, the number and shares outstanding of listed issuers, the number of new listings, the number of traders in the market and similar factors. Deutsche Börse Group’s and NYSE Euronext’s business, cash flows and results of operations are also dependent upon the success of their commercial technology business, which, in turn, is directly dependent on the commercial well being of their customers. Deutsche Börse Group and NYSE Euronext have no direct control over these variables. Among other things, Deutsche Börse Group and NYSE Euronext depend more upon the relative attractiveness of the financial instruments traded on their exchanges, and the relative attractiveness of the exchanges as a venue on which to trade these financial instruments, as compared to other exchanges, and alternative trading venues as well as over-the-counter trading. These variables are in turn influenced by economic, political and market conditions in Europe, the United States, and elsewhere in the world that are beyond Deutsche Börse Group’s or NYSE Euronext’s direct control, including factors such as:

 

   

broad trends in business and finance, including industry-specific circumstances, capital market trends and the mergers and acquisitions environment;

 

   

terrorism, natural disasters and war;

 

   

concerns over inflation and the level of institutional or retail confidence;

 

   

changes in monetary policy and foreign currency exchange rates;

 

   

the availability of short-term and long-term funding and capital;

 

   

the availability of alternative investment opportunities;

 

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changes in the level of trading activity;

 

   

changes and volatility in the prices of securities;

 

   

changes in tax policy;

 

   

changes in the level and volatility of interest rates and GDP growth;

 

   

legislative and regulatory changes;

 

   

changes in customer base;

 

   

legislative and regulatory changes, including the potential for regulatory arbitrage among regulated and unregulated markets if significant policy differences emerge among markets;

 

   

the perceived attractiveness, or lack of attractiveness, of the U.S. or European capital markets;

 

   

the outbreak of contagious disease pandemics or other public health emergencies in the regions in which Deutsche Börse Group and NYSE Euronext operate which could decrease levels of economic and market activities; and

 

   

unforeseen market closures or other disruptions in trading, clearing, settlement, custody, collateral management and/or market data technology.

General economic conditions affect financial and securities markets in a number of ways, from determining availability of capital to influencing investor confidence. Adverse changes in the economy or the outlook for the financial and securities industry can have a negative impact on Deutsche Börse Group’s and NYSE Euronext’s revenues through declines in trading volumes, new listings, clearing and settlement volumes and demand for market data. Accordingly, generally adverse market conditions may have a disproportionate effect on Deutsche Börse Group’s and NYSE Euronext’s business. Furthermore, Deutsche Börse Group’s and NYSE Euronext’s infrastructure and overhead is based on assumptions on certain levels of market activity (e.g., trading volumes, the number of listed companies or demand for market data).

If levels of activity on Deutsche Börse Group’s and NYSE Euronext’s exchanges are adversely affected by any of the factors described above or other factors beyond their control, this could also have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Deutsche Börse Group and NYSE Euronext may be at greater risk from terrorism than other companies.

Given Deutsche Börse Group’s and NYSE Euronext’s prominence in the global securities industry and the concentration of many of their properties and personnel in European and U.S. financial centers, including lower Manhattan, Deutsche Börse and NYSE Euronext may be more likely than other companies to be a direct target of, or an indirect casualty of, attacks by terrorists or terrorist organizations, or other extremist organizations that employ threatening or harassing means to achieve their social or political objectives.

In the event of an attack or a threat of an attack, Deutsche Börse Group’s and NYSE Euronext’s security measures and contingency plans may be inadequate to prevent significant disruptions in their businesses, technology or access to the infrastructure necessary to maintain their businesses. For example, if part or all of Deutsche Börse Group’s and NYSE Euronext’s primary data center facilities become inoperable, the disaster recovery and business continuity planning practices may not be sufficient and Deutsche Börse Group and NYSE Euronext may experience a significant delay in resuming normal business operations. Damage to Deutsche Börse Group’s or NYSE Euronext’s facilities due to terrorist attacks may be significantly in excess of insurance coverage, and Deutsche Börse Group and NYSE Euronext may not be able to insure against some damage at a reasonable price or at all. The threat of terrorist attacks may also negatively affect Deutsche Börse Group’s and NYSE Euronext’s ability to attract and retain employees. In addition, terrorist attacks may cause instability or decreased trading in the securities markets, including trading on exchanges. Any of these events could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

 

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Deutsche Börse Group and NYSE Euronext are exposed to fluctuations in foreign exchange rates and interest rates.

Since Deutsche Börse Group and NYSE Euronext conduct operations in several different countries, including several European countries and the United States, a substantial portion of their assets, liabilities, revenues and expenses are denominated in euros, U.S. dollars, Swiss francs and pounds sterling. As a result, Holdco will be exposed to foreign exchange rate fluctuations. The multiple currency conversions that will take place as a result of transactions between subsidiaries of Holdco located in different jurisdictions will also expose Holdco and its subsidiaries to further exchange rate fluctuations. In addition, Deutsche Börse Group and NYSE Euronext are each exposed to interest rate fluctuations. Deutsche Börse Group is exposed to interest rate fluctuations, in particular in connection with cash investments or borrowings as well as through corporate transactions. Except for its fixed rate bonds, most of NYSE Euronext’s financial assets and liabilities are based on floating rates. Holdco, Deutsche Börse Group and NYSE Euronext may use derivative financial instruments with the aim to reduce some of the negative impacts that could result from fluctuations in these rates. Holdco’s, Deutsche Börse Group’s and NYSE Euronext’s assumptions and assessments with regard to the future development of these rates and the chosen level of risk avoidance or risk tolerance have a substantial impact on the success or failure of their hedging policies. The failure of Holdco’s, Deutsche Börse Group’s or NYSE Euronext’s hedging policies could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Deutsche Börse Group and NYSE Euronext are exposed to liquidity risk and may lack sufficient liquidity to meet their daily payment obligations or may incur increased refinancing costs.

Following the completion of the combination, Holdco and its subsidiaries will be exposed to liquidity risk, and may lack sufficient liquidity to meet their daily payment obligations or may incur increased refinancing costs in the event of liquidity shortages. Deutsche Börse Group and NYSE Euronext manage liquidity risk by matching the duration of investments and liabilities, restricting investments in potentially illiquid or volatile asset classes, repledging securities received with central banks and maintaining sufficient financing facilities to overcome unexpected demands for liquidity. In addition, credit lines are available to Deutsche Börse Group and NYSE Euronext or their subsidiaries to provide additional liquidity should it be needed. Nevertheless, Deutsche Börse Group and NYSE Euronext cannot guarantee that current liquidity levels and contingency credit lines are adequate in the event of liquidity shortages. The lack of sufficient liquidity to close out open positions could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Deutsche Börse Group’s and NYSE Euronext’s businesses may be adversely affected by risks associated with clearing and settlement activities.

The customers of the Deutsche Börse subsidiaries that operate its clearing and settlement businesses, Eurex Clearing and Clearstream, may default on their contractual, borrowing or guarantee obligations and not be able to fulfill their obligations or settle outstanding liabilities. Eurex Clearing AG is the clearinghouse within Deutsche Börse Group. It offers fully automated and straight-through post-trade services for derivatives, equities, repo, energy and fixed income transactions. In its role as a central counterparty, Eurex Clearing is exposed to counterparty, credit and market risk because it acts as a buyer to all sellers and as a seller to all buyers, thereby seeking to minimize counterparty risk and to maximize operational efficiency. Eurex Clearing maintains policies and procedures to help ensure that its clearing members can satisfy their obligations and uses several lines of defense to cover counterparty risks, including guarantee funds and requesting daily and, where necessary, intraday deposit of collateral by clearing members in the form of cash or securities in line with the parties’ respective positions and margin requirements. In the event of a clearing member’s default, the collateral deposited may be inadequate to cover all remaining obligations after closing out all open positions.

Clearstream lends only on a short-term basis, for the purposes of increasing the efficiency of the settlement for securities transactions and largely to collateralized parties with a good credit rating. These credit lines may be revoked at any time. Furthermore, Clearstream is also exposed to credit risk in its securities lending activities.

 

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Although lending transactions are collateralized, Clearstream customers may default and the collateral held may not be sufficient to avoid incurring a credit loss, which could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

NYSE Euronext’s UK regulated derivatives subsidiary, the London Market of NYSE Liffe, took full responsibility for clearing activities in NYSE Euronext’s UK derivatives market on July 30, 2009. As a result, NYSE Liffe became the central counterparty for contracts entered into by its clearing members on the London Market of NYSE Liffe market and outsources certain services to LCH.Clearnet Limited, which is referred to in this document as “LCH.Clearnet.” NYSE Liffe has credit exposure to those clearing members. NYSE Liffe’s clearing members may encounter economic difficulties as a result of the market turmoil and tightening credit markets, which could result in bankruptcy and failure. NYSE Liffe offsets its credit exposure through arrangements with LCH.Clearnet in which LCH.Clearnet provides clearing guarantee backing and related risk functions to NYSE Liffe, and under which LCH.Clearnet is responsible for any defaulting member positions and for applying its resources to the resolution of such a default. In addition, NYSE Liffe maintains policies and procedures to help ensure that its clearing members can satisfy their obligations, including by requiring members to meet minimum capital and net worth requirements and to deposit collateral for their trading activity. Nevertheless, NYSE Euronext cannot be sure that in extreme circumstances, LCH.Clearnet might not itself suffer difficulties, in which case these measures might not prove sufficient to protect NYSE Liffe from a default, or might fail to ensure that NYSE Liffe is not adversely affected in the event of a significant default.

NYSE Euronext has also entered into a joint venture with the Depositary Trust & Clearing Corporation (which is referred to in this document as “DTCC”) to establish the New York Portfolio Clearing (which is referred to in this document as “NYPC”), which is expected to be operational during the first half of 2011. NYPC will initially clear fixed income futures listed on NYSE Liffe US, with the ability to add other exchanges and derivatives clearing organizations in the future. NYSE Euronext has agreed to commit a $50 million financial guarantee to the NYPC default fund and will face clearing risks similar to those it would expect to face with respect to NYSE Liffe Clearing. NYSE Euronext may also in the future expand its clearing operations to other markets and financial products, which would increase its exposure to these types of risks.

In the event that any of the above counterparties to Deutsche Börse Group or NYSE Euronext default on their obligations, such default could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operation.

Deutsche Börse Group’s share of trading in Deutsche Börse Group listed securities and NYSE Euronext’s share of trading in NYSE Euronext listed securities has declined and may continue to decline.

As a result of increasing competition, including from nontraditional trading venues and other competitors that are also among Deutsche Börse Group’s and NYSE Euronext’s largest customers, Deutsche Börse Group’s share of the European Electronic Order Book Equity Trading declined from approximately 13.49% in 2009 to 12.25% in 2010. NYSE Euronext’s share of trading on a matched basis in NYSE-listed securities has declined from approximately 38% in 2009 to 36% in 2010. NYSE Euronext’s share of Euronext-listed securities remained relatively stable in 2010. MTFs offer trading in the securities listed on the Frankfurt Stock Exchange, Euronext and other European regulated markets and compete directly with Deutsche Börse Group as well as with NYSE Euronext for market share. If Deutsche Börse Group’s and NYSE Euronext’s trading share continues to decrease relative to its competitors, they may be less attractive to market participants as a source of liquidity. This could further accelerate their loss of trading volume. Similarly, a lower trading share of Deutsche Börse Group and NYSE Euronext listed securities may cause issuers to question the value of a Deutsche Börse Group listing and a NYSE Euronext listing, which could adversely impact Deutsche Börse Group’s and NYSE Euronext’s listing business.

In addition, in the United States, the allocation of market data revenues among competing market centers is tied to trading share. A decline in NYSE’s trading share lowers its percentage of the U.S. national market system

 

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tape pool revenues from the consolidated tape association and unlisted trading privileges. Declines in NYSE Euronext’s trading share could adversely affect the growth, viability and importance of some of its market data products.

If growth in Deutsche Börse Group’s and NYSE Euronext’s overall trading volumes of Deutsche Börse Group-listed and NYSE Euronext-listed securities does not offset any significant decline in their trading share, or if a decline in their trading share in Deutsche Börse Group-listed and NYSE-listed securities makes their venues appear less liquid, then this could have a material adverse effect on Holdco’s business, financial condition and results of operations.

If Deutsche Börse Group’s or NYSE Euronext’s goodwill or intangible assets become impaired, Deutsche Börse Group, NYSE Euronext and, after the combination, Holdco may be required to record a significant charge to earnings.

Under IFRS and U.S. GAAP, Deutsche Börse Group and NYSE Euronext, respectively, review their amortizable intangible assets for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill and indefinite-lived intangible assets are tested for impairment at least annually, and are also tested when factors arise that may be considered a change in circumstances indicating that the carrying value of the goodwill or intangible assets may not be recoverable, such as a decline in stock price and market capitalization, reduced future cash flow estimates, and slower growth rates. Deutsche Börse Group or NYSE Euronext may be required to record a significant charge in their financial statements during the period in which any impairment of its goodwill or intangible assets is determined. For example, Deutsche Börse had to write off €415.6 million in 2009 and another €453.3 million in 2010 solely due to the acquisition of ISE in 2007. In addition, any goodwill arising from the combination accounted on the Holdco level may be subject to impairment, and Holdco may be required to record a significant charge in its financial statements. If additional impairment charges are incurred, this could have a material adverse effect on Holdco’s business, financial condition and results of operations.

Deutsche Börse Group and NYSE Euronext are subject to significant litigation risks and other liabilities.

Many aspects of Deutsche Börse Group’s and NYSE Euronext’s business involve litigation risks. These risks include, among others, potential liability from disputes over terms of a securities trade or from claims that a system or operational failure or delay caused monetary losses to a customer, as well as potential liability from claims that Deutsche Börse Group or NYSE Euronext facilitated an unauthorized transaction or provided materially false or misleading statements in connection with a transaction. NYSE Euronext is involved and may continue to be involved in allegations of misuse of the intellectual property of others, as well as other commercial disputes. Dissatisfied customers frequently make claims against their service providers regarding quality of trade execution, improperly cleared or settled trades, mismanagement or even fraud. Although aspects of Deutsche Börse Group’s and NYSE Euronext’s business are protected by regulatory immunity, Holdco could nevertheless be exposed to substantial liability under German law, U.S. federal and state laws and court decisions, rules and regulations promulgated by BaFin, the SEC, U.S. Commodity Futures Trading Commission (which is referred to in this document as the “CFTC”) or European and other regulators, and laws and court decisions in the countries where Deutsche Börse Group and NYSE Euronext operate. Holdco could incur significant expenses defending claims, even those without merit. In addition, an adverse resolution of any lawsuit or claim against Holdco or its subsidiaries may require them to pay substantial damages or impose restrictions on how they conduct business. Furthermore, Holdco, Deutsche Börse Group and NYSE Euronext may face claims in connection with the combination. Potential claims may include any kind of alleged violations of contractual obligations to which Holdco, Deutsche Börse Group or NYSE Euronext may be bound by conducting the combination, alleged breaches of fiduciary duties vis-à-vis shareholders and other reasons.

For example, following the announcement of the business combination agreement on February 15, 2011, various lawsuits were filed by purported NYSE Euronext shareholders in at least two U.S. state courts and one

 

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federal court in which the plaintiffs are claiming breach of fiduciary duty against the individual defendants, and claiming aiding and abetting that alleged breach against one or more of the entity defendants. In general, the lawsuits critique the terms of the proposed transaction and seek, among other things, an injunction against its completion. Certain members of Deutsche Börse Group are involved in various legal proceedings, including an action seeking damages and the restraint of certain securities held in an account of Clearstream Banking S.A. alleged to be beneficially owned by an Iranian government entity in connection with an enforcement action against the government of Iran by representatives of victims of a bombing in Beirut in the 1980s. In addition, Clearstream Banking S.A. is subject to an action seeking damages for alleged improper payments in violation of a judgment obtained by creditors of the Republic of Argentina and an action has been filed against Clearstream Banking S.A., seeking damages for alleged improper payments made to former investors in the Madoff Ponzi scheme. NYSE Euronext is also involved in various legal proceedings, including a dispute with the U.S. Internal Revenue Service regarding a proposed adjustment seeking to disallow certain deductions taken by the NYSE for compensation paid to its former chairman and chief executive officer in the tax years 2001, 2002 and 2003.

An adverse result with respect to any of these various proceedings could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Deutsche Börse Group’s and NYSE Euronext’s networks and those of their third-party service providers may be vulnerable to security risks.

The secure transmission of confidential information over public and other networks is a critical element of Deutsche Börse Group’s and NYSE Euronext’s operations. Deutsche Börse Group’s and NYSE Euronext’s networks and those of their third-party service providers may be vulnerable to unauthorized access, computer viruses and other security problems. Persons who circumvent security measures could wrongfully access and use Deutsche Börse Group’s and NYSE Euronext’s information or their customers’ information, or cause interruptions or malfunctions in their operations. Deutsche Börse Group’s and NYSE Euronext’s security measures are costly, and may prove to be inadequate. This could cause Deutsche Börse Group and NYSE Euronext to incur reputational damage, regulatory sanctions, litigation, loss of trading share, loss of trading volume and loss of revenues, any of which could also have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

If the indices and other products of Deutsche Börse Group and NYSE Euronext contain undetected errors or fail to perform properly, this could have a material adverse effect on their business, financial condition or results of operation.

The market data & analytics business of Deutsche Börse Group and the information services business of NYSE Euronext develop, calculate, market and distribute indices in a variety of asset classes. As a result, Deutsche Börse Group’s and NYSE Euronext’s indices underlie derivative financial instruments of investors, financial market product developers and issuers. Indices and other products developed or licensed by Deutsche Börse Group and NYSE Euronext may contain miscalculations or undetected errors. As a consequence market participants who use real time price and orderbook information or other market moving signals to make their buy or sell decisions and recommendations or require accurate instrument reference data for risk management activities and error-free settlement may base their decisions on miscalculated or erroneous information. Therefore, Deutsche Börse Group and NYSE Euronext may be exposed to damage claims brought forward against them based on such miscalculations or undetected errors and could result in harm to their reputation, contractual disputes, negative publicity, delays in or loss of market acceptance of their products, license terminations or renegotiations, or unexpected expenses and diversion of resources to remedy errors. This may have a material adverse effect on Holdco’s, Deutsche Börse Group’s and NYSE Euronext’s business and cash flows, financial condition and results of operations.

 

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Deutsche Börse Group’s and NYSE Euronext’s reliance on third parties could adversely affect their businesses if these third parties cease to perform the functions that they currently perform.

Deutsche Börse Group and NYSE Euronext rely on third party service providers that they do not control. Deutsche Börse Group relies on third-party service providers, including information technology hardware providers and certain data suppliers. In particular, the index and analytic products developed in the market data & analytics business and the business of STOXX Ltd. of Deutsche Börse Group are dependent upon updates and continuing access to historical and current data from third-party sources, such as exchanges and other data suppliers who calculate and provide a variety of indices. If any of the provided information has errors, is delayed or is unavailable, this could materially impair the ability of Deutsche Börse Group to effectively operate these businesses. In particular, the timing of calculations of real-time indices as reference prices for certain derivatives is critical, and any delay may cause Deutsche Börse Group to face liabilities from customers who rely on these indices as a reference point for their specific products.

NYSE Euronext relies on third parties for certain clearing and regulatory services. For example, it relies on LCH.Clearnet to provide a clearing guarantee and manage related risk functions in connection with clearing on some of its European cash and derivatives markets. NYSE Euronext also relies on the services of Euroclear for settling transactions on its European cash markets. FINRA performs the market surveillance and enforcement functions for Deutsche Börse Group’s U.S. derivatives exchange, ISE. Although NYSE Regulation oversees FINRA’s performance of regulatory services for NYSE Euronext’s markets, and NYSE Regulation has retained staff associated with such responsibility as well as for rule development and interpretations, regulatory policy, oversight of listed issuers’ compliance with applicable listing standards and real-time stockwatch reviews, NYSE Euronext is significantly reliant on FINRA to perform these regulatory functions. NYSE Euronext also depends on the Consolidated Tape Association to oversee the dissemination of real-time trade and quote information in NYSE- and NYSE Amex-listed securities. To the extent that any of these third parties experiences difficulties, materially changes its business relationship with Deutsche Börse Group or NYSE Euronext or is unable for any reason to perform its obligations, Deutsche Börse Group’s or NYSE Euronext’s business or reputation may be materially adversely affected.

Deutsche Börse Group and NYSE Euronext also rely on members of the trading community to maintain markets and add liquidity. Global market and economic conditions have been difficult and volatile in recent years, in particular for financial services companies, such as the members of the exchanges.

To the extent that any external service providers provide inadequate products, experience difficulties or losses, do not provide sufficiently experienced personnel, are unable to provide services to the required levels or otherwise fail to meet their obligations under their service arrangements with either Deutsche Börse Group or NYSE Euronext, a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations could occur.

Holdco will face risks when entering into or increasing its presence in markets where Deutsche Börse Group and NYSE Euronext do not currently compete or when entering into new business lines.

After the combination, Holdco may enter into or increase its presence in markets that already possess established competitors. Attracting customers in certain countries may also be subject to a number of risks, including currency exchange rate risk, difficulties in enforcing agreements or collecting receivables, longer payment cycles, compliance with the laws or regulations of these countries, and political and regulatory uncertainties. Holdco may also expand its presence or enter into newly developing arenas of competition where less regulated competitors exist and demand for such services is subject to uncertainty. As a result, demand and market acceptance for Holdco’s products and services within these markets will be subject to a high degree of uncertainty and risk. Holdco may be unable to enter into or increase its presence in these markets and compete successfully, which could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

 

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Damage to Holdco’s, Deutsche Börse Group’s and/or NYSE Euronext’s reputation could materially adversely affect Holdco’s business.

One of Deutsche Börse Group’s and NYSE Euronext’s competitive strengths is their strong reputation and brand name. Their reputation could be harmed in many different ways, including by regulatory, governance or technology failures or the activities of members or listed companies whom they do not control. Damage to Deutsche Börse Group’s and/or NYSE Euronext’s reputation could cause some issuers not to list their securities on their exchanges, as well as reduce the trading volume on their exchanges, and/or reduce clearing and/or settlement volumes. Any of these events could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Deutsche Börse Group and NYSE Euronext may complete acquisitions and dispositions prior to completion of the combination that may affect their respective businesses and/or the value of the consideration to be received by Deutsche Börse shareholders and NYSE Euronext shareholders in the combination.

Prior to completion of the combination, the business combination agreement limits the ability of Deutsche Börse, NYSE Euronext and their respective subsidiaries to complete or enter into agreements that provide for acquisitions and divestitures in excess of €100 million in the aggregate for dispositions and €200 million in the aggregate for acquisitions. However, each party may engage in transactions up to these agreed upon limits and may seek the consent of the other party to engage in more substantial transactions. Although neither of the parties currently has an agreement in place which provides for such a transaction, each party continually evaluates strategic alternatives, including opportunities to expand through acquisitions or to focus the business through dispositions.

Any acquisition by Deutsche Börse or NYSE Euronext may result in the use of a significant portion of the party’s available cash, an issuance of shares that would be dilutive to their respective shareholders, the incurrence of debt, and/or significant acquisition-related charges. In addition, any acquisition will involve significant risks, including the possible failure to successfully integrate and realize the expected benefits of the acquisition. Acquisitions may also result in the assumption of liabilities, including liabilities that are contingent, unknown or not fully known at the time of the acquisition, which could have a material adverse effect on the business of Deutsche Börse Group or NYSE Euronext.

As the value of consideration to be received by Deutsche Börse shareholders and NYSE Euronext shareholders is dependant upon the value of the combined company, changes to either company’s business, financial position or results of operations prior to completion may adversely affect the value of the consideration to be received by their shareholders in the combination. If an acquisition or disposition ultimately proves to be detrimental to Deutsche Börse Group, NYSE Euronext or Holdco, their respective shares may be worth less than they otherwise would have been had such transaction not been undertaken or successfully completed. Acquisitions and dispositions also may divert the time and focus of Deutsche Börse Group’s and/or NYSE Euronext’s management from operating their respective businesses to negotiating and completing transactions and, in the case of acquisitions, integrating the acquired businesses.

Detrimental acquisitions or dispositions by Deutsche Börse or NYSE Euronext or the failure to successfully implement or agree upon any such transactions may affect their respective business and/or the value of the consideration to be received by Deutsche Börse shareholders and NYSE Euronext shareholders in the combination.

Future business combinations, acquisitions, partnerships and joint ventures may require significant resources and/or result in significant unanticipated costs or liabilities.

Holdco may seek to grow its business by entering into business combination transactions, making acquisitions or entering into partnerships or joint ventures, which may be material. The market for acquisition targets and strategic alliances is highly competitive, particularly in light of increasing consolidation in the industry, which could adversely affect Holdco’s ability to find acquisition targets or strategic partners consistent with its objectives.

 

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In pursuing its strategy, consistent with industry practice, Holdco may routinely engage in discussions with industry participants regarding potential strategic transactions. Such transactions may be financed by the issuance of additional equity securities, including shares of Holdco, or the incurrence of indebtedness, or a combination thereof. The issuance of additional equity may be substantial and dilutive to existing Holdco shareholders. In addition, the announcement or completion of future transactions could have a material adverse effect on the price of the shares of Holdco. Holdco could face financial risks associated with incurring indebtedness, such as reducing its liquidity, curtailing its access to financing markets and requiring the service of such indebtedness.

In addition, business combination transactions, acquisitions, partnerships and joint ventures may require significant managerial attention, which may be diverted from Holdco’s other operations. These capital, equity and managerial commitments may impair the operation of Holdco’s businesses. Furthermore, any future business combination transactions or acquisitions could entail a number of additional risks, including increased regulation and exposure to unanticipated liabilities, all of which could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Risks Relating to Regulatory Environment and Legal Risks

Further uncertainties in connection with the resolution on and implementation of new regulations may reduce the level of activities of Deutsche Börse Group and/or NYSE Euronext.

A significant piece of regulatory legislation was enacted in the United States, the Dodd-Frank Wall Street Reform and Consumer Protection Act (which is referred to in this document as the “Dodd-Frank Act”) on July 15, 2010. Few provisions of the Dodd-Frank Act became effective immediately upon signing and many of its provisions require the adoption of regulations by various U.S. federal agencies and departments. Furthermore, the legislation contains substantial ambiguities, many of which will not be resolved until regulations are adopted. As a result, it is difficult to predict all of the effects that the legislation will have on Deutsche Börse Group or NYSE Euronext, although they do expect it to impact their businesses in various and significant ways. For instance, NYPC, the joint venture futures clearing organization within NYSE Euronext that began its operations in the first half of 2011, could become subject to heightened prudential standards to be adopted by the CFTC, as well as to the U.S. Federal Reserve’s back-up authority to regulate financial market utilities that are primarily regulated by the CFTC, if NYPC is designated as systemically important. In addition, other Deutsche Börse or NYSE Euronext subsidiaries that are not regulated in the U.S. today but have a U.S. presence could be required to register with regulatory authorities and be subject to extensive regulation. The Dodd-Frank Act authorizes the SEC and CFTC to adopt position limits on the trading of swap and security-based swap products that may trade today or in the future on the facilities of certain of Deutsche Börse’s or NYSE Euronext’s subsidiaries. Such position limits could cause market participants to change their trading behavior and could result in Deutsche Börse Group or NYSE Euronext experiencing a loss of transaction-based revenue and limit opportunities for future growth. The Dodd-Frank Act also provides regulators, such as the SEC, with enhanced examination and enforcement authorities, which could result in their regulated subsidiaries incurring increased costs to respond to examinations or other regulatory inquiries.

Similar uncertainties arise in the context of the European regulatory framework for financial markets and Deutsche Börse Group’s and NYSE Euronext’s European listings, trading, market data, clearing and settlement businesses, which are largely affected by European regulations. The European Commission has proposed or is consulting on significant reforms, notably on the following subjects:

 

   

A legislative proposal on the revision of the Markets in Financial Instruments Directive (which is referred to in this document as “MiFID”) that governs most of Deutsche Börse Group’s and NYSE Euronext’s day-to-day activities as market operators is expected to be released by the European Commission during the course of 2011. In December 2010, the European Commission issued a Public Consultation on the Markets in Financial Instruments Directive review. Both Deutsche Börse Group and NYSE Euronext actively participated in the regulatory discussion and have submitted written responses to the European Commission’s public consultation;

 

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In September 2010, the European Commission released a legislative proposal for a regulation on OTC derivatives, central counterparties and trade repositories (formerly, the European Market Infrastructure Regulation, which is referred to in this document as “EMIR”). Deutsche Börse, NYSE Euronext and over two hundred other parties responded to the European Commission’s public consultation with detailed written submissions. The adoption of the regulation is subject to the co-decision process by the European Parliament and the Council, with political agreement expected to be achieved in 2011. This would enable Regulation on Derivative Transactions, Central Counterparties and Trade Repositories to be implemented in 2012, in line with the G20 timetable. The original emphasis in EMIR was on mandating central counterparty (which is referred to in this document as a “CCP”) clearing for “eligible” OTC contracts. However, detailed discussion continues about the full scope of the regulation, regulatory standards for CCPs, and others, which may carry a risk of significant impact on current business models and of potentially burdensome and costly operational requirements being imposed on CCPs. In addition, work within the Bank for International Settlements is expected to lead to the current zero risk weighting of collateral lodged with CCPs being replaced by a more burdensome regime for a CCP’s counterparties;

 

   

In September 2010, the European Commission published a legislative proposal for a regulation on short selling and certain aspects of credit default swaps to regulate short selling activity in the EU. The adoption of the short selling regulation is currently subject to the co-decision process with the European Parliament and the Council;

 

   

In November 2010, the European Commission published the second public consultation on a new legal framework for intermediated securities. The European Commission intends to produce legislative proposals on this issue (Securities Law Directive) before the summer of 2011;

 

   

The European Commission has carried out a public consultation in relation to the Market Abuse Directive, and is expected to release a legislative proposal for a revised Market Abuse Directive during the course of 2011; and

 

   

In January 2011, the European Commission launched a public consultation on the regulation of Central Securities Depositories (which are referred to in this document as “CSDs”) and the harmonization of settlement across Europe and is expected to issue a legislative proposal in the summer of 2011.

If and when the above legislative proposals are adopted, and/or if any other European legislation is adopted or amended, this could adversely impact the businesses of Deutsche Börse Group and NYSE Euronext in various and significant ways and could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

In addition, Deutsche Börse Group’s and NYSE Euronext’s European businesses are also subject to national legislation in Europe. Part of the legislation governing financial markets in the European countries where it operates is undergoing reform and new legislation is being enacted or proposed. For example, on July 26, 2010, the UK Government announced its plans for reforming the UK regulatory regime, to involve the abolition of the Financial Services Authority and its replacement with two separate regulators, one covering prudential risks and the other conduct of business matters. This would mean that, from the end of 2012, NYSE Euronext’s London trading market of NYSE Liffe would be principally overseen by a new regulator, the Financial Conduct Authority, whereas NYSE Euronext’s London-based clearing activities would be principally regulated by the Bank of England. All of these changes could affect its business in the future. In Belgium, as from March 2011 prudential competences of the Belgian Banking, Finance and Insurance Commission (Commission bancaire, financière et des assurances) (which is referred to in this document as the “CBFA”) should be transferred to the Belgian National Bank with possible impact on NYSE Euronext’s clearing activities.

Finally, three new independent European agencies (the European Securities Markets Authority (which is referred to in this document as “ESMA”) in the field of financial markets, the European Banking Authority for the banking field and the European Insurance and Occupational Pensions Authority for insurances and

 

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occupational pensions companies) have been created to contribute to safeguarding the stability of the European Union’s financial system by ensuring the integrity, transparency, efficiency and orderly functioning of securities markets, as well as enhancing investor protection. In particular, ESMA is intended to foster supervisory convergence both amongst securities regulators and across financial sectors by working closely with the other competent European Supervisory Authorities. The need for those agencies to become fully operational and the dialogue they will have to put in place with the national competent regulators could slow the process and the implementation of any new measures.

It is expected that market participants will change their behavior in response to these new regulations. Deutsche Börse Group and NYSE Euronext are highly dependent upon the levels and nature of activity on their exchanges and clearing houses, in particular the volume of financial instruments traded and cleared, the number of participants in the market, the relative attractiveness of the financial instruments traded on their exchanges and cleared in their clearing houses and similar factors. To the extent that the above regulatory changes cause market participants to reduce the levels or restrict the nature of activity on Deutsche Börse Group’s and/or NYSE Euronext’s exchanges, and/or clearing houses, the business and cash flows, financial condition and results of operations of Holdco may be adversely affected. Furthermore, their U.S. and international exchanges compete for listings in other jurisdictions. If the Dodd-Frank Act or any of the pending European legislation described above or any other legislation that might be adopted in the future adversely affects the legal and regulatory environment surrounding the markets that Deutsche Börse Group and/or NYSE Euronext operate, or the market perceptions thereof, it may make it difficult for their exchanges and/or clearing houses to compete with other competitors in different jurisdictions, which could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Regulatory changes or court rulings may have an adverse impact on Deutsche Börse Group’s and NYSE Euronext’s ability to derive revenue from market data fees.

Regulatory developments could reduce the amount of revenue that Deutsche Börse Group and NYSE Euronext obtain from market data fees. With respect to Deutsche Börse Group’s and NYSE Euronext’s U.S. exchanges, the ability to assess fees for market data products is contingent upon receiving approval from the SEC. There continue to be opposing industry viewpoints as to the extent that Deutsche Börse Group and NYSE Euronext should be able to charge for market data, and it is conceivable that the SEC could undertake an examination of exchange market data fees. If such an examination is conducted, and the results were to be detrimental to the ability of Deutsche Börse Group’s and NYSE Euronext’s U.S. exchanges to charge for market data, there could be a negative impact on their revenues. In November 2004, the SEC proposed corporate governance, transparency, oversight and ownership rules for registered national exchanges and other self-regulated organizations (which are referred to in this document as “SROs”) and issued a concept release examining the efficacy of self-regulation. The concept release also solicited public comment concerning the level of market data fees, following several years of claims from some competitors and data intermediaries that market data fees and revenues are excessive. Holdco cannot predict whether, or in what form, any regulatory changes will take effect or their impact on the business of its subsidiaries. A determination by the SEC, for example, to link market data fees to marginal costs, to take a more active role in the market data rate-setting process, or to reduce the current levels of market data fees could have a material adverse effect on Holdco’s market data revenues.

European exchanges are currently authorized to sell trade information on a non-discriminatory basis at a reasonable cost. This regulatory position could be modified or interpreted by the European Commission or European court decisions — as well as in Germany by the relevant exchange council (Börsenrat) — in a manner that could have a material adverse effect on Holdco’s European market data revenues.

 

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The legal and regulatory environment in the United States may make it difficult for NYSE Euronext’s U.S. exchanges to compete with non-U.S. exchanges for the listings of non-U.S. companies and adversely affect its competitive position.

NYSE Euronext’s U.S. exchanges will continue to compete to obtain the listing of non-U.S. issuer securities (in addition to the listing of U.S. issuer securities). However, the legal and regulatory environment in the United States, as well as the perception of this environment, has made and may continue to make it more difficult for NYSE Euronext’s U.S. exchanges to compete with non-U.S. securities exchanges for these listings and adversely affect its competitive position.

For example, the Sarbanes-Oxley Act of 2002 imposes a stringent set of corporate governance, reporting and other requirements on both U.S. and non-U.S. publicly listed companies which requires significant resources from issuers. NYSE Euronext believes this has had an adverse impact on the ability of NYSE Euronext’s U.S. exchanges to attract and retain listings of non-U.S. issuers. In addition, the Dodd-Frank Act imposes new corporate governance requirements on U.S. listed companies, which may diminish the relative attractiveness of a listing on a U.S. exchange and adversely affect the ability of NYSE Euronext’s U.S. exchanges to attract and retain listings. In recent years, both U.S. and non-U.S. companies are increasingly seeking to access the U.S. capital markets through private transactions that do not involve listing on a U.S. exchange, such as through Rule 144A transactions directed exclusively to mutual funds, hedge funds and other large institutional investors. Moreover, the rules facilitating a non-U.S. company’s ability to delist its securities and exit the U.S. public company reporting system may make it more difficult for NYSE Euronext to retain listings of non-U.S. companies, and may diminish the perception of NYSE Euronext’s U.S. exchanges as premier listing venues, which could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Deutsche Börse Group and NYSE Euronext operate in a highly regulated industry and may be subject to censures, fines and other legal proceedings if they fail to comply with their legal and regulatory obligations.

Deutsche Börse Group and NYSE Euronext operate in a highly regulated industry and are subject to extensive regulation. The securities industry, as well as the banking and financial services industry, are subject to extensive governmental regulation and could become subject to increased regulatory scrutiny. As a matter of public policy, these regulations are designed to safeguard the integrity of the securities and other financial markets and to protect the interests of investors in those markets. The SEC and the CFTC regulate Deutsche Börse Group’s and NYSE Euronext’s U.S. exchanges and clearing houses in their respective jurisdictions and have broad powers to audit, investigate and enforce compliance with their rules and regulations and impose sanctions for non-compliance. European regulators have similar powers with respect to Deutsche Börse Group’s and NYSE Euronext’s exchanges and clearing houses in their respective countries. Eurex Clearing and Clearstream Banking Frankfurt operate as credit institutions with banking licenses under German law and therefore are subject to the banking supervision of BaFin and are obliged to comply with certain legal requirements. The failure to comply with these requirements could result in significant sanctions. As the scope of Holdco’s business expands, it may also become subject to oversight by other regulators. In addition, there has been and may continue to be an increased demand for more regulation and stricter oversight. This may lead to the passage of legislation and implementation of regulation which may impose excessive regulatory burdens. As a result, Holdco may sustain losses related to a failure to comply with new or existing laws or regulations. Holdco may also sustain losses if contracts must be renegotiated or if contract terms must be altered as a result of new laws, regulations, or court decisions. Additionally, Holdco may have greater responsibility for preventing illegal activities, such as fraud, money laundering, violations of competition regulations or breaches of banking secrecy and face increased financial exposure or penalties related to an increased responsibility as a result of new laws or regulations. Furthermore, non-compliance or inadequate compliance with new or existing laws, inadequate contract terms or court decisions not adequately observed in customary business practice as well as fraud could lead to losses. Holdco’s ability to comply with applicable laws and rules will largely depend on its establishment and maintenance of appropriate systems and procedures, as well as its ability to attract and retain qualified personnel.

 

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Both the European regulators and the U.S. regulators are vested with broad enforcement powers over exchanges and clearing houses in their respective jurisdictions, including powers to censure, fine, issue cease-and-desist orders, prohibit an exchange or clearing house from engaging in some of its operations or suspend or revoke an exchange’s or a clearing house’s recognition, license or registration. In the case of actual or alleged non-compliance with regulatory requirements, Deutsche Börse Group’s and NYSE Euronext’s exchanges or clearing houses could be subject to investigations and administrative or judicial proceedings that may result in substantial penalties, including revocation of an exchange’s or a clearing house’s recognition, license or registration. Any such investigation or proceeding, whether successful or unsuccessful, would result in substantial costs and diversions of resources, could negatively impact Holdco’s reputation and could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations. Furthermore, action by any of Deutsche Börse Group’s or NYSE Euronext’s regulators requiring them to limit or otherwise change their operations, or prohibiting them from engaging in certain activities, could adversely affect their business and cash flows, financial condition and operating results. For instance, on September 30, 2010, the SEC and CFTC issued a joint report presenting their findings regarding the market events of May 6, 2010, commonly referred to as the “flash crash.” Although NYSE Euronext does not anticipate that the joint report will lead to the adoption of significant regulatory changes that adversely affect its business, the risk of such changes is heightened as a result of the breadth of the review by the SEC and CFTC, the impact of the May 6th event on investors and the marketplace and the fact that certain aspects of its business were highlighted in the joint report. Furthermore, any regulatory changes in response to the “flash crash” and joint report may impact certain of NYSE Euronext’s customers’ business models and practices, in particular high frequency trading, which may in turn adversely affect Holdco’s business and cash flows, financial condition and results of operations.

Holdco may face competitive disadvantages, or may lose or impede its business opportunities, if it does not receive necessary or timely regulatory approvals for new business initiatives.

Deutsche Börse Group and NYSE Euronext operate exchanges and/or clearing houses in Germany, the United States, France, Belgium, Portugal, the Netherlands, the United Kingdom and Switzerland. Regulators in each of these countries regulate exchanges and clearing houses through the adoption and enforcement of rules governing the trading activities, business conduct and financial responsibility of such exchanges and clearing houses and entities and individuals associated with them. All of Deutsche Börse Group’s and NYSE Euronext’s initiatives in these jurisdictions with regulatory implications must be approved by the relevant authorities in each of these countries. Changes to Holdco’s articles of association and to the organizational documents or rules of Deutsche Börse Group’s and NYSE Euronext’s European exchanges and clearing houses, to the extent affecting the activities of these entities, may also require approvals. Holdco may from time to time seek to engage in new business activities, some of which may require changes to it or its exchanges’ and clearing houses’ organizational documents or rules.

Deutsche Börse Group, through ISE, currently operates one U.S. registered national securities exchange and NYSE Euronext currently operates three U.S. registered national securities exchanges and one designated contract market. Pursuant to U.S. laws and regulations, these exchanges are responsible for regulating their member organizations through the adoption and enforcement of rules governing the trading activities, business conduct and financial responsibility of their member organizations and the individuals associated with them. Changes to the rules of the U.S. registered securities exchanges are generally subject to the approval of the SEC, which publishes proposed rule changes for public comment. Changes to the organizational documents or rules of Deutsche Börse Group’s or NYSE Euronext’s U.S. exchanges, to the extent affecting the activities of these exchanges, must also be approved. Holdco may from time to time seek to engage in new business activities, some of which may require changes to it or its U.S. exchanges’ organizational documents or rules.

Any delay or denial of a requested approval could cause Deutsche Börse Group and NYSE Euronext to lose business opportunities, slow their ability to integrate their different markets or slow or impede their ability to change their governance practices. Deutsche Börse Group’s and NYSE Euronext’s competitive position could be significantly weakened if their competitors are able to obtain regulatory approval for new functionalities faster,

 

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or with less cost or difficulty, or if approval is not required for Deutsche Börse Group’s and NYSE Euronext’s competitors but is required for Deutsche Börse Group and NYSE Euronext. For instance, NYSE Euronext may be adversely affected if it is unable to obtain SEC approval to make permanent its New Market Model pilot program, which includes the creation of designated market makers, or if Deutsche Börse is unable to obtain SEC approval for the planned Eurex-ISE trading and clearing link. Competitors that are not registered exchanges are subject to less stringent regulation. In addition, as Deutsche Börse Group and NYSE Euronext seek to expand their product base, they could become subject to the oversight of additional regulatory bodies. As a consequence, any delay or denial of requested approvals could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Similar risks could arise if the banking and financial services institutions operated by Holdco do not receive necessary or timely regulatory approvals for their new business initiatives.

NYSE Euronext’s reliance on FINRA to perform regulatory functions has increased, and Holdco’s business could be adversely affected if they cease to perform these functions.

On June 14, 2010, NYSE and FINRA announced the completion of the previously announced agreement under which FINRA will assume responsibility for performing the market surveillance and enforcement functions previously conducted by NYSE Regulation. As of that date, FINRA assumed these regulatory functions for NYSE Euronext’s U.S. equities and options markets, NYSE, NYSE Arca and NYSE Amex, and a substantial majority of the NYSE Regulation staff was transferred to FINRA. Although NYSE Regulation remains ultimately responsible for overseeing FINRA’s performance of regulatory services for NYSE Euronext’s markets, and NYSE Regulation has retained staff associated with such responsibility as well as for rule development and interpretations, oversight of listed issuers’ compliance with financial and corporate governance standards and real-time stockwatch reviews, following the completion of this agreement NYSE Euronext is substantially more reliant on FINRA to perform these regulatory functions. NYSE Euronext is required to allocate significant resources to FINRA to perform these regulatory functions. The obligation to fund these regulatory functions could limit Holdco’s ability to reduce its expense structure, and could limit its ability to invest in or pursue other opportunities that may be beneficial to Holdco’s shareholders. If FINRA experiences difficulties, materially changes their business relationship with NYSE Euronext or is unable for any reason to perform their obligations, this could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Deutsche Börse Group’s obligations in connection with its regulatory functions limit its funding resources.

Pursuant to Section 5 para. 1 of the German Stock Exchange Act (Börsengesetz), operators of German exchanges must provide certain funds to the exchanges operated by them. Therefore, Deutsche Börse Group, as operator of the Frankfurt Stock Exchange and Eurex Deutschland, is required to provide the Frankfurt Stock Exchange and Eurex Deutschland, at the request of their respective boards of management, with staff and financial resources as well as the means necessary for the operation and further development of their businesses. This applies accordingly to Eurex Frankfurt AG as operator of Eurex Deutschland Exchange, European Energy Exchange AG and EEX Power Derivatives GmbH as operators of EEX and Tradegate Exchange GmbH as operator of Tradegate Exchange. The obligation to fund these regulatory functions could limit Deutsche Börse Group’s and Holdco’s funding resources, Holdco’s ability to reduce its expense structure, and could limit its ability to invest in or pursue other opportunities that may be beneficial to Holdco’s shareholders, which could in turn have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Regulatory changes requiring exchange operators to allow additional central counterparties to clear trades on their exchanges may adversely affect Deutsche Börse Group’s and NYSE Euronext’s clearing operations.

Deutsche Börse and NYSE Euronext both own affiliates that generate income as central counterparties to trades conducted on exchanges and over-the-counter markets. A central counterparty acts as an intermediary between trading parties, minimizing the default risk of a contracting party and clearing the transaction. As the

 

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European Commission begins to require more types of financial instruments to be cleared by central counterparties, it is possible that it will adopt regulations that require exchange operators to allow other central counterparties — including those that are not affiliates of the exchange operator — to clear trades on their exchanges. If such regulations are implemented, Deutsche Börse and NYSE Euronext could be required to allow central counterparties, in addition to their own affiliates, to clear trades conducted through Deutsche Börse’s and NYSE Euronext’s exchanges. Such regulations could reduce Deutsche Börse’s and NYSE Euronext’s revenues, which could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Conflicts of interest between Deutsche Börse Group’s and NYSE Euronext’s for-profit status and their regulatory responsibilities may adversely affect their businesses.

Deutsche Börse Group and NYSE Euronext are for-profit businesses with regulatory responsibilities. Pursuant to the German Stock Exchange Act, Deutsche Börse Group is obligated to take measures to recognize and to avoid conflicts of interest between its own commercial and economic interests as a for-profit business or such interests of its shareholders and the public interest in the proper operation of the Frankfurt Stock Exchange or Eurex Deutschland, as far as such conflicts could have a negative impact on the operation of the Frankfurt Stock Exchange or Eurex Deutschland or the trading participants. For example, Deutsche Börse Group is required by law to ensure the supervision and proper functioning of the Frankfurt Stock Exchange and Eurex Deutschland. If the ability to carry out this statutory supervisory function is adversely affected by a conflict of interest in violation of the German Stock Exchange Act, then this conflict of interest could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

The listing of Holdco’s shares on the New York Stock Exchange, the Frankfurt Stock Exchange and Euronext Paris could also potentially create a conflict between the respective exchanges’ regulatory responsibilities to ensure a proper listing and trading procedure, on the one hand, and the commercial and economic interests of Holdco, Deutsche Börse Group and NYSE Euronext, on the other hand. Any failure by one of the exchanges of Deutsche Börse Group or NYSE Euronext with legal or self-regulatory responsibility to diligently and fairly regulate its trading and issuers or to otherwise fulfill its regulatory obligations could significantly harm Holdco’s, Deutsche Börse Group’s and NYSE Euronext’s reputation and prompt heightened regulatory scrutiny (which again may result in sanctions being imposed), and could have a material adverse effect on Holdco’s business and cash flows, financial condition and results of operations.

Risks Relating to Tax Matters

There can be no assurances that U.S. holders of NYSE Euronext shares will not be required to recognize gain for U.S. federal income tax purposes upon the exchange of NYSE Euronext shares for Holdco shares in the merger.

It is intended that, for U.S. federal income tax purposes, (1) the merger will qualify as a reorganization within the meaning of Section 368(a) of Internal Revenue Code and/or the merger and the exchange offer, taken together will qualify as a transaction described in Section 351(a) of Internal Revenue Code, and (2) each transfer of NYSE Euronext shares to Holdco by a NYSE Euronext shareholder pursuant to the merger (other than a NYSE Euronext shareholder that is a “five percent transferee stockholder” of Holdco, as defined in Treasury Regulations promulgated under Section 367(a) of Internal Revenue Code) will not be subject to Section 367(a) of Internal Revenue Code.

It is a condition to NYSE Euronext’s obligation to complete the merger that Holdco have completed the exchange offer. It is a condition to Holdco’s obligation to complete the exchange offer that NYSE Euronext receives one or more private letter rulings from the Internal Revenue Service substantially to the effect that (1) the merger will qualify as a reorganization within the meaning of Section 368(a) of Internal Revenue Code and/or the merger and the exchange offer, taken together, will qualify as an exchange within the meaning of

 

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Section 351(a) of Internal Revenue Code, which is referred to in this document as the “first NYSE tax condition,” and (2) each transfer of NYSE Euronext shares to Holdco by a U.S. holder of NYSE Euronext shares (other than a “five percent transferee shareholder” of Holdco, as defined in Treasury regulations promulgated under Section 367(a) of Internal Revenue Code) will qualify for an exception to Section 367(a)(1) of Internal Revenue Code under Treasury Regulation Sections 1.367(a)-3(c)(1) and 1.367(a)-3(c)(9), which is referred to in this document as the “second NYSE tax condition,” and together with the first NYSE tax condition, the “NYSE tax conditions.”

Under the business combination agreement, NYSE Euronext is required to waive the first NYSE tax condition if NYSE Euronext receives a written opinion of counsel, in form and substance reasonably satisfactory to NYSE Euronext, dated no later than four days prior to the time at which the acceptance period of the exchange offer expires (or such later date as permitted by the BaFin) (the later of such dates is referred to as the “Waiver Limitation Date”), to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of Internal Revenue Code and/or the merger and the exchange offer, taken together, will qualify as a transaction described in Section 351(a) of Internal Revenue Code. NYSE Euronext currently expects that it will receive the opinion of counsel described in the immediately preceding sentence and, therefore, that it will waive the first NYSE tax condition.

Under the business combination agreement, NYSE Euronext is required to waive the second NYSE tax condition if NYSE Euronext receives an opinion of counsel, in form and substance reasonably satisfactory to NYSE Euronext, dated as of the Waiver Limitation Date, to the effect that each transfer of NYSE Euronext shares to Holdco by a U.S. holder (other than a holder that is a “five percent transferee shareholder” of Holdco, as defined in Treasury regulations promulgated under Section 367(a) of the Internal Revenue Code) will not be subject to Section 367(a)(1) of Internal Revenue Code. NYSE Euronext and Deutsche Börse intend to jointly request from the Internal Revenue Service the private letter ruling described in the second NYSE tax condition. There can be no assurance that such private letter ruling will be received. In addition, unless Holdco acquires at least 80% of the Deutsche Börse shares, by vote and value, in the exchange offer by the Waiver Limitation Date, NYSE Euronext does not expect that it will receive the opinion of counsel described in this paragraph. In the event of a waiver of the first NYSE tax condition and/or the second NYSE tax condition, NYSE Euronext does not intend to recirculate this document to resolicit NYSE Euronext shareholder approval.

Accordingly, there can be no assurance that the merger will qualify for the intended U.S. federal income tax treatment described above. In particular, if NYSE Euronext waives the second NYSE tax condition, the parties do not receive the private letter ruling requested from the Internal Revenue Service, and the requirements of Section 367(a) of Internal Revenue Code and the Treasury Regulations promulgated thereunder are not otherwise satisfied, U.S. holders of NYSE Euronext shares will be required to recognize gain pursuant to Section 367(a) of Internal Revenue Code upon the transfers of NYSE Euronext shares to Holdco pursuant to the merger.

Holdco, Deutsche Börse, NYSE Euronext and their respective subsidiaries are subject to tax audits and could incur significant tax liabilities as a result of such audits.

Holdco, Deutsche Börse, and NYSE Euronext and their respective subsidiaries are regularly subject to tax audits. As a result of current or future tax audits or any other reviews by taxing authorities having jurisdiction over Holdco, Deutsche Börse, NYSE Euronext or their respective subsidiaries, additional taxes could be assessed (e.g., in connection with acquisitions, restructuring transactions or intercompany arrangements), which could lead to an increase in the tax burden of the Holdco group.

 

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Holdco may be or become taxable in a jurisdiction other than the Netherlands and/or may be or become a “dual resident company.” This may increase the aggregate tax burden on Holdco and its shareholders. The combination of the businesses of Deutsche Börse Group and NYSE Euronext may result in an increase in the overall tax burden of the combined group.

Because Holdco is incorporated under Dutch law it will be treated for Dutch corporate income tax purposes as a resident of the Netherlands. Based on the currently envisaged management structure of Holdco and current tax laws of the United States, Germany and the Netherlands, as well as applicable income tax treaties, and current interpretations thereof, Holdco expects to take the position that it is tax resident solely in the Netherlands. Holdco has requested, but has not yet obtained, binding rulings from the tax authorities in the Netherlands and in Germany confirming this treatment. However, even if such rulings are granted, the applicable tax laws or interpretations thereof may change, the representations on which such rulings were based may be inaccurate, or the facts may change. As a consequence, Holdco may be or become a tax resident of a jurisdiction other than the Netherlands and/or may be or become a dual resident company. This may increase the aggregate tax burden on Holdco and its shareholders. In particular, this may result in the imposition of additional withholding taxes on Holdco’s shareholders, which withholding taxes may not be creditable, deductible or otherwise refundable in a shareholder’s country of tax residence.

Dividends and other intra-group payments made by Deutsche Börse, NYSE Euronext or their respective subsidiaries may be subject to withholding taxes imposed by the jurisdiction in which the entity making the payment is organized or tax resident. Unless such withholding taxes are fully credited against the income tax liability of the entity receiving the payment or fully refunded, dividends and other cross-border payments within the Holdco group may increase the aggregate tax burden imposed on the Holdco group. Although Holdco intends to arrange the ownership of its subsidiaries and future intercompany payments with a view to minimizing the incurrence of such withholding taxes, there can be no assurance that it will succeed.

Risks Relating to Holdco Shares

There has been no prior public market for Holdco shares, and the market price of Holdco shares may be volatile.

Holdco plans to list the Holdco shares on the New York Stock Exchange, the Frankfurt Stock Exchange and Euronext Paris. However, an active public market for Holdco shares may not develop or be sustained after the completion of the combination. Holdco cannot predict the extent to which a trading market will develop or how liquid that market might become.

The market price of Holdco shares may be volatile. Broad general economic, political, market and industry factors may adversely affect the market price of Holdco shares, regardless of Holdco’s actual operating performance. Factors that could cause fluctuations in the price of Holdco shares may include, among other things:

 

   

actual or anticipated variations in quarterly operating results and the results of competitors;

 

   

changes in financial estimates by Holdco or by any securities analysts that might cover Holdco shares;

 

   

conditions or trends in the industry, including regulatory changes or changes in the securities marketplace;

 

   

changes in the market valuations of exchanges and other trading facilities in general, or other companies operating in the securities industry;

 

   

announcements by Holdco or its competitors of significant acquisitions, strategic partnerships or divestitures;

 

   

announcements of investigations or regulatory scrutiny of Holdco’s operations or lawsuits filed against it;

 

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additions or departures of key personnel; and

 

   

sales of Holdco shares, including sales of shares by its directors and officers or its strategic investors.

Following the completion of the combination, Holdco may cease to be a foreign private issuer, which could result in significant additional costs and expenses.

Holdco is currently a “foreign private issuer,” as such term is defined in Rule 3b-4 under the Exchange Act. Following the combination, Holdco will lose its “foreign private issuer” status if more than 50% of the Holdco shares are held by U.S persons and any of the following occurs: (1) a majority of its directors or executive officers are U.S. citizens or residents; (2) more than 50% of its assets are located in the United States; or (3) Holdco’s business is administered principally in the United States. Given that the office of the Holdco chief executive officer will be based principally in the United States, it is possible that Holdco could lose its foreign private issuer status if more than 50% of the Holdco shares will be held by U.S. persons as of the relevant date of determination.

Under Rule 3b-4 under the Exchange Act, the determination of whether a company is a foreign private issuer is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. Accordingly, the first determination as to whether Holdco will continue to be a “foreign private issuer” after the completion of the combination will be made on June 30, 2012.

If Holdco were to lose its status as a foreign private issuer, then it would have to mandatorily comply with U.S. federal proxy requirements, and Holdco officers, directors and principal shareholders would become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. Holdco would also be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. Finally, Holdco would have to comply with the NYSE listing requirements applicable to U.S. domestic issuers, including the requirement to hold annual meeting for the election of directors. As a result, the regulatory and compliance costs to Holdco under U.S. securities laws as a U.S. domestic issuer may be significantly higher. Holdco may also be required to modify certain of its policies to comply with governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs.

In addition, pursuant to Sections 302 and 404 of the Sarbanes-Oxley Act of 2002, management of Holdco would also be required to certify to and report on, and Holdco’s independent registered public accounting firm would be required to attest to, the effectiveness of Holdco’s internal controls over financial reporting with respect to the operations of Holdco as of the end of such fiscal year. The rules governing the standards that must be met for management to assess Holdco’s internal controls over financial reporting are complex, and require significant documentation, testing and possible remediation. The continuing effort to comply with regulatory requirements relating to internal controls would likely cause Holdco to incur increased expenses and diversion of management’s time and other internal resources, in particular in respect of Deutsche Börse and its subsidiaries, which have not previously been subject to Rule 404 requirements. Holdco also may encounter problems or delays in completing the implementation of any changes necessary to make a favorable assessment of its internal controls over financial reporting. In addition, in connection with the attestation process by Holdco’s independent registered public accounting firm, Holdco may encounter problems or delays in completing the implementation of any requested improvements or receiving a favorable attestation. If Holdco loses its foreign private issuer status and cannot favorably assess the effectiveness of its internal controls over financial reporting, or if Holdco’s independent registered public accounting firm is unable to provide an unqualified attestation report on Holdco’s assessment, this could have a material adverse effect on investor’s confidence and the price of Holdco shares.

If Holdco continues to be a foreign private issuer, you may not receive the information about Holdco that you would typically receive from a publicly traded U.S. domestic company.

Holdco is currently a “foreign private issuer,” as such term is defined in Rule 3b-4 under the Exchange Act. Following the completion of the combination, it is possible that Holdco will remain a foreign private issuer. As

 

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long as Holdco remains a foreign private issuer and does not elect to file with the SEC as a U.S. domestic issuer, investors may not receive the information that investors would typically receive from a publicly traded U.S. domestic company. In particular, a foreign private issuer does not have to comply with U.S. federal proxy requirements, and Holdco officers, directors and principal shareholders would not be subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, Holdco would not be required to file quarterly periodic reports or registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. Holdco also would not be obligated to comply with certain NYSE listing requirements applicable to U.S. domestic issuers, including the requirement to hold an annual meeting for the election of directors. As a result, the information that you have regarding Holdco may be less than you would receive from a publicly traded U.S. domestic company.

The level of any dividend paid in respect of Holdco shares is subject to a number of factors, including the financial condition and results of operations of Deutsche Börse Group and NYSE Euronext, as well as the distributions of operating earnings to Holdco by Deutsche Börse Group and NYSE Euronext and the freely distributable reserves of Holdco.

Although Holdco expects to pay dividends, the level of any dividend paid in respect of Holdco shares is within the discretion of the Holdco board of directors and is subject to a number of factors, including the business and financial conditions, earnings and cash flow of, and other factors affecting Holdco and its subsidiaries. As Holdco itself is not expected to perform any operating activities, its ability to pay a dividend and the level of any dividends in respect of the Holdco shares is subject to the extent to which Holdco receives funds, directly or indirectly, from its operating subsidiaries and divisions in a manner which creates funds from which dividends can be legally paid. Under Dutch law, Holdco may make distributions to its shareholders and other persons entitled to distributable profits only up to the amount of the part of Holdco’s net assets which exceeds the nominal value of the share capital of Holdco and its reserves that must be maintained by law. In addition, each subsidiary’s ability to pay dividends will depend on the law of the jurisdiction in which such subsidiary is organized.

Any delay in implementing the post-completion reorganization could adversely impact the payment of dividends from Deutsche Börse to Holdco. In the event that Holcdo holds, directly or indirectly, 75% or more of the outstanding Deutsche Börse shares after the completion of exchange offer or any time thereafter, Holdco intends to enter (directly and/or through a wholly owned subsidiary) into a domination agreement or a combination of a domination agreement and a profit and loss transfer agreement in order to more fully integrate Deutsche Börse Group into the combined group. The effectiveness of these agreements may be delayed for an uncertain time, including, for example, due to shareholder litigation or may not be achievable at all. This would limit the ability of Holdco to request the payment of dividends from Deutsche Börse. Any failure to pay dividends in any financial year could have a material adverse effect on the price of Holdco shares.

Shareholders of Holdco could be diluted in the future.

Holders of Holdco shares generally will have a preemption right with respect to any issuance of Holdco shares or the granting of rights to subscribe for Holdco shares, unless such preemption right is restricted or excluded by the general meeting of shareholders or by the Holdco board of directors if so designated by the general meeting of shareholders. It is expected that prior to the completion of the combination, the Holdco board of directors will be designated by the general meeting of shareholders as the corporate body competent to restrict or exclude preemption rights, subject to the limited authority it has to issue Holdco shares and grant rights to subscribe for Holdco shares, up to the maximum unissued portion of the authorized share capital as it will exist at the time of the issue, for a period of five years from the date of such resolution. If preemption rights are restricted or excluded, the ownership interests of Holdco shareholders could be diluted upon the issuance of shares. Due to laws and regulations in jurisdictions outside the Netherlands, shareholders in those jurisdictions may not be able to exercise their preemption subscription rights unless Holdco takes action to register or otherwise qualify the rights offering under the laws of that jurisdiction. For example, in the United States, U.S. holders of Holdco

 

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shares may not be able to exercise preemption rights unless a registration statement under the Securities Act is declared effective with respect to the Holdco shares issuable upon exercise of such rights or an exemption from the U.S. registration requirements is available. If shareholders in such jurisdictions are unable to exercise their subscription rights, their ownership interest in Holdco would be diluted. Any future issuance of new Holdco shares or debt instruments convertible into Holdco shares where subscription rights of Holdco shareholders are not available or are excluded would result in the dilution of existing Holdco shareholders and reduce the earnings per Holdco share, which could have a material adverse effect on the price of Holdco shares.

 

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RECENT DEVELOPMENTS AND OUTLOOK

Recent Developments

Holdco was formed on February 10, 2011 and on February 14, 2011 Holdco formed Pomme Merger Corporation, a Delaware corporation, as a wholly owned U.S. subsidiary of Holdco. Upon completion of the merger, Pomme Merger Corporation will merge with and into NYSE Euronext. No other material activities have been carried out by Holdco since its formation on February 10, 2011.

Business Combination Agreement

On February 15, 2011, Holdco, Deutsche Börse, NYSE Euronext and Pomme Merger Corporation entered into a business combination agreement pursuant to which Deutsche Börse will become a subsidiary of Holdco through the exchange offer and NYSE Euronext will become a subsidiary of Holdco through the merger. In connection therewith, on February 15, 2011, Holdco announced its intention to launch a voluntary takeover bid in the form of an exchange offer for the Deutsche Börse shares. See “The Business Combination Agreement” for more information regarding the business combination agreement.

Litigation Concerning the Combination

Following the announcement of the combination on February 15, 2011, several complaints were filed in the Delaware Court of Chancery (which is referred to in this document as the “Delaware Court”); the Supreme Court of the State of New York, County of New York (which is referred to in this document as the “New York Court”); and the U.S. District Court for the Southern District of New York (which is referred to in this document as the “SDNY”), challenging the proposed combination. Four of the actions were filed in the Delaware Court and have been consolidated as In re NYSE Euronext Shareholders Litigation, Consol. C.A. No. 6220-VCS. Five actions were filed in the New York Court and are being coordinated under a single master file, NYSE Euronext Shareholder Litigation Master File, Index No. 773,000/11. One action, Jones v. Niederauer, et al., C.N. 11-CV-01502, is pending in the SDNY.

All of the complaints raise substantially the same claims. All are purported class actions filed on behalf of all NYSE Euronext public shareholders and variously name as defendants NYSE Euronext, its directors, Deutsche Börse, Pomme Merger Corporation and Holdco (certain defendants are not named in all of the actions). The complaints generally allege that the individual defendants breached their fiduciary duties in connection with their consideration and approval of the proposed combination and that the entity defendants aided and abetted those breaches. The complaints seek, among other relief, injunctive relief against the consummation of the combination, unspecified monetary damages and plaintiffs’ costs and attorney’s fees.

Predicting the outcome of these lawsuits is difficult. An adverse judgment for monetary damages could have a material adverse effect on the operations of the Holdco group following completion of the combination. A preliminary injunction could delay or jeopardize the completion of the combination, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the combination. The defendants believe that the claims asserted against them in these lawsuits are without merit, and intend to defend themselves vigorously against the claims.

Deutsche Börse

On March 31, 2011 Eurex Zürich AG announced that its shareholding in EEX will increase from 35.23% to 56.14%. Now that the transaction has been approved by the relevant supervisory bodies, including the EEX supervisory board, all of the conditions for the immediate execution of the transaction have been fulfilled. The closing is expected to occur in April 2011.

 

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NYSE Euronext

On February 18, 2011, the formation of the NYSE Blue joint venture was consummated.

On April 1, 2011, NYSE Euronext received a letter from NASDAQ OMX Group, Inc. and IntercontinentalExchange, Inc. setting forth a non-binding proposal to acquire all of the outstanding shares of NYSE Euronext common stock, where NYSE Euronext stockholders would receive $14.24 in cash, 0.4069 of a share of NASDAQ OMX common stock and 0.1436 of a share of IntercontinentalExchange common stock, for each share of NYSE Euronext common stock. The letter indicated that NASDAQ OMX Group and IntercontinentalExchange agreed between themselves that, in connection with the closing of such transaction, IntercontinentalExchange would acquire NYSE Euronext’s European derivatives businesses, including Liffe, as well as Liffe US and NYPC, and NASDAQ OMX would retain NYSE Euronext’s other businesses, including the NYSE Euronext stock exchanges in New York, London, Paris, Amsterdam, Brussels and Lisbon, the U.S. equity options business and the information services and technology solutions businesses. The letter further indicated that the proposal was based on publicly available information and was not an offer capable of acceptance, but rather a non-binding indication of interest to serve as a basis for moving toward a mutually agreed transaction. On April 1, 2011, NYSE Euronext issued a press release requesting its shareholders not to take any action with respect to the proposal and indicating that the NYSE Euronext board of directors would carefully review the proposal in consultation with its independent financial and legal advisors. The NYSE Euronext board of directors held a meeting by telephone call that same day to receive an initial briefing on receipt of the proposal, but no determination was made with respect to the proposal.

Outlook

Holdco does not expect to conduct any material activities other than the matters contemplated by the business combination agreement, including the exchange offer and the merger, as described in “The Business Combination Agreement” and “Business of Holdco and Certain Information about Holdco.” Following the completion of the combination, Holdco expects to implement the post-completion reorganization steps described in “The Business Combination Agreement — Post-Completion Reorganization.”

Deutsche Börse Group and NYSE Euronext will, until the earlier of the completion of the combination and the termination of the business combination agreement, conduct their businesses in the ordinary and usual course consistent with past practice, subject to the limitations set forth in the business combination agreement. See “The Business Combination Agreement — Conduct of the Business Pending the Business Combination.”

The completion of the combination is expected to occur at the end of 2011.

 

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GENERAL INFORMATION

Presentation of Financial Information

This document contains:

 

   

the audited balance sheet of Holdco as of February 10, 2011;

 

   

the unaudited pro forma condensed consolidated financial information of Holdco as of December 31, 2010, and for the year then ended, prepared on the basis of IFRS;

 

   

the audited consolidated financial statements of Deutsche Börse Group as of December 31, 2010 and 2009 and for the three years in the period ended December 31, 2010, prepared on the basis of IFRS as issued by the International Accounting Standards Board; and

 

   

the audited consolidated financial statements of NYSE Euronext as of December 31, 2010 and 2009 and for the three years in the period ending December 31, 2010.

Unless indicated otherwise, financial data presented in this document has been taken or derived from the audited consolidated financial statements of Deutsche Börse Group and NYSE Euronext included in this document.

Where information is identified as “unaudited” in this document, this means it has not been subject to an audit or inspection by an auditor (prüferische Durchsicht).

The financial information set forth in this document has been rounded for ease of presentation. Accordingly, in certain cases, the sum of the numbers in a column in a table may not conform to the total figure given for that column.

For additional information on the presentation of financial information in this document, see the consolidated financial statements of Deutsche Börse Group beginning on page FIN-[] of this document and the consolidated financial statements of NYSE Euronext beginning on page FIN-[] of this document.

Forward-Looking Statements

This document contains forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts and events. Forward-looking statements in this document include, in particular, statements containing information on future earnings capacity, plans and expectations of Holdco’s business, its growth and profitability, and general economic and regulatory conditions and other factors to which it is or may be exposed. Statements made using terms such as “may,” “might,” “will,” “should,” “expect,” “plan,” “intends,” “anticipate,” “believe,” “is of the opinion,” “assume,” “estimate,” “predict,” “potential” “is likely” or “continue,” and the negative of these terms and other comparable terminology indicate forward-looking statements. Forward-looking statements in this document are based on estimates and assessments made to the best of Holdco’s present knowledge. These forward-looking statements are based on assumptions, uncertainties and other factors, the occurrence or non-occurrence of which could cause the actual results of Holdco, including its financial condition and/or profitability, to differ materially from or fail to meet the expectations expressed or implied in the forward-looking statements. Accordingly, investors are strongly advised to read the following sections of this document: “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Deutsche Börse Group,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of NYSE Euronext,” “Business of Holdco and Certain Information about Holdco,” “Business of Deutsche Börse Group and Certain Information about Deutsche Börse Group,” “Business of NYSE Euronext and Certain Information about NYSE Euronext” and “Recent Developments and Outlook.” These sections include more detailed descriptions of factors that might have an impact on the business of Holdco and the market in which it operates.

 

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In light of the uncertainties and assumptions, it is also possible that the future events mentioned in this document might not occur. In addition, the forward-looking estimates and forecasts reproduced in this document from third-party reports could prove to be inaccurate.

The forward-looking statements contained in this document speak only as of the date on which they are made. Holdco expressly disclaims any obligation or undertaking, except as required by law, to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Holdco’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based or to conform any such statement to actual events or developments.

Sources of Industry and Market Data

Unless otherwise indicated, the information contained in this document on the market environment, market developments, growth rates, market trends and competition in the markets in which Deutsche Börse Group and NYSE Euronext operate is taken from publicly available sources, including, but not limited to, third-party sources, or reflects Holdco’s, Deutsche Börse Group’s and NYSE Euronext’s estimates that are principally based on information from publicly available sources. The information obtained from third-party sources that is cited in this document has been reproduced accurately. As far as Holdco is aware and is able to ascertain from information published by such third-party sources, no facts have been omitted which would render the reproduced information inaccurate or misleading.

Exchange Rates

The following table shows for the period from January 1, 2005 through March 31, 2011, the low, high, average and period exchange rate U.S. dollars per euro.

 

     Exchange Rates  
     Low      High      Average     Period End  
     (U.S. dollars per euro)  

Year

          

2005

     1.1667         1.3476         1.2400 (1)      1.1842   

2006

     1.1860         1.3327         1.2661 (1)      1.3197   

2007

     1.2904         1.4862         1.3797 (1)      1.4603   

2008

     1.2446         1.6010         1.4695 (1)      1.3919   

2009

     1.2547         1.5100         1.3955 (1)      1.4332   

2010