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NYSE Euronext (NYSE:NYX)

Q1 2011 Earnings Call

April 28, 2011 8:00 am ET

Executives

Michael Geltzeiler - Chief Financial Officer and Group Executive Vice President

Unknown Speaker -

Jennifer Ginnis -

Jan Hessels - Chairman and Chairman of Nominating & Governance Committee

Ricardo Salgado - Director and Member of Human Resources & Compensation Committee

Unknown Executive -

Duncan Niederauer - Chief Executive Officer and Director

Kenneth Steiner -

Analysts

Unknown Speaker

Jan Hessels

All right, it's 8:00. Ladies and gentlemen, dear shareholders, welcome to this 2011 NYSE Euronext Annual Meeting. My name is Jan Michiel Hessels, Chairman of the Board of Directors. And I'm very happy to be here with all of you again, and more importantly that you are here with so many for this important meeting.

I would also like to welcome those stockholders who are attending the meeting via the internet this year, the meeting is web casted.

Seated next to me is Marsh Carter, Deputy Chair of the Board of Directors. On this side is Duncan Niederauer, our CEO; and at the far end we have Dominique Cerutti, our President and Deputy Chief Executive Officer.

I'll now call the 2011 annual meeting of stockholders to order. We know that there are many questions on the minds of our stockholders and we also promised to report our first quarter earnings at today's meeting. So we will first hear the CEO's report on the state of the company, then we will conduct a formal business of the meeting and finally, importantly, we will take questions from the stockholders.

To ensure that our stockholders have ample opportunity to ask questions, we ask that only stockholders or their designated proxies ask questions. If you're called on by me, please begin by identifying yourself and the number of shares you hold.

Each stockholder who has complied with the applicable procedural requirements will be allotted 2 minutes to present his or her stockholder proposal during the formal part of the meeting and 2 minutes to ask questions at the Q&A session at the end of the meeting. As a reminder, question should relate directly to the company business and not to personal or individual matters. Copies of the agenda and the rules of conduct have been placed on your seats. So as promised, Duncan, could you now give the CEO reports and may I again ask that all stockholders hold their questions until the appropriate time at the end of the meeting.

Duncan Niederauer

Thanks, Jan Michiel. And thank you all for being here. This is going to be a little different than the normal annual shareholder meeting. Normally, we just report the most recent news from up here. We thought with everything going on, it was much more appropriate to do a full sim report and everything that's going on at the company. And as all of you noticed and as Jan Michiel mentioned, we have rolled the Q1 report through to today so we announced our earnings early this morning.

So without further adieu, I'm going to give each of you a minute to read that slide, and then that slide and then we'll move right into the presentation, okay?

What we're going to talk about today, I'm really going to break down into 3 sections. The first section is going to be about the first quarter, a terrific quarter for the company, we continue to execute. The second section of the presentation is going to be really that this quarter comes as no surprise to those of you who have been with us for the last couple of years, it's a continuation of everything we've been doing. And if you think about the beginning of our tenure here as a leadership team, '08 and'09 were about transforming the company, getting us fit to fight the good fight. 2010 was about evolving and communicating our strategy, and 2011 is really when we've been kicking in to high gear. And that will take us into the third section, which is the proposed merger with DB, which we believe is the accelerator.

We believe not only is it consistent with the strategy we've talked about and articulated for the last couple of years, it is the difference maker. It is going to help us get to where we're trying to get to even faster. And as you'll see in the presentation, I hope, it should be fairly obvious that the 2 complementary sets of assets create a game-changing company and what is increasingly a global industry.

So first a little bit on the first quarter. Those of you, many of you may have had a chance to see our results that we published earlier this morning. A terrific quarter by any measure. Whether you want to compare it to the Q1 results last year, if you want to compare it sequentially to Q4, it's hard to argue with anything other than this was a great quarter. Revenue is up against last year and last quarter, expense down against last year and last quarter. You can see operating income growing more than 20% versus last year, 40% versus the last quarter. And an earnings and EPS, 25% versus last year, nearly 50% versus last quarter. Margins continue to expand. We continue to operate the company more efficiently, right on target. This was roughly about 10% to 12% above what the analysts were expecting by the way. I think the analysts were at $0.60, $0.61, so we come in at $0.68, really a terrific start to the year by any measure.

And what we're also proud of is we had success across our portfolio. As you know we've been talking about these 3 segments in our business for the last year or so. Our Derivatives business, a terrific quarter. Our Cash Trading and Listings business, which I'll get on to a little more detail on in a minute, a terrific quarter and a record revenue quarter for our Information Solutions Services Tech business, our Commercial Technology business and Data business.

Now the first quarter, obviously, we had some other things going on like announcing a game changing merger that didn't make the slide, but we had a terrific quarter in terms of executing the business just day to day because what we're committed to all of you is, we're not taking our eye off the ball. 2011 we've got a plan, we're executing against that plan. And yes in the middle of the quarter, we announced what we think is a game changer that doesn't give us permission or the right to not pay attention to what we've committed to all of you for 2011. So what I thought is I'll just hit a few of the highlights of the quarter to leave you with the impression that while we're busy working on that, we're also executing very successfully against the plan that we've articulated.

Probably the most significant introduction of the quarter was the introduction of the very innovative NYPC initiative. We've talked about this on many analysts calls, in fact we talked about this at the annual meeting last year as we were beginning to work on it. So we take our NYSE Liffe business. We get a medallion out of the CME-Nymex deal to give us the right operated derivative business in the United States. We start to build on that by listing a few products in the metal space and then subsequently in the MSCI index space. And then we get together with some of the leading customers with DTC and with the regulators, and we do what I think is a great example of collaboration in the 21st century and we'll talk about it later. This is innovative. This is collaborative. We're out of the game, we've only been up and running for a month, we're already at 2% to 3% market share in Eurodollars, open interest as you'll see later in the presentation, growing literally every day, and we don't even have most of the clients connected yet. So this really didn't contribute anything to Q1 earnings, but I think it's significant because it gives us another growth opportunity that we've invested in.

Great quarter for Liffe volumes, great quarter for Options volumes, and we're really well positioned to take advantage of that.

Shifting to the Cash Trading and Listings business. You will read some things in the press that say we're having trouble competing. The U.S. isn't competing for IPOs anymore. We're not sure who they're talking about because we were number 1 globally for IPOs in the first quarter by proceeds raised. Last year, we finished number 3 only behind Hong Kong and Shanghai. And we were number 2 until the last couple of days of the year but think of the amount of issuance that is going on in that part of the world, and it is destined to continue to go on and yet we're still punching right at that rate, right at that weight, right with them, and for the first quarter we were number 1.

In the U.S., about 60% of the deals have come our way including several in the Tech space, which is sort of new news for us if you look back at our history. 92% of the proceeds raised year-to-date listed on the NYSE. I'll leave it to you to conclude where the other 8% went.

Two more companies have transferred to the NYSE. Two more companies have announced they're transferring, that's 18 transfers to the NYSE in the last 15 months. We've had 3 companies move the other away.

In our European business, a terrific quarter year-on-year, a terrific quarter sequentially and we've also improved our margins and held our market shares steady in the U.S. business.

And lastly, in the Technology Services business, as I said a record quarterly revenue. That continues to grow on track for probably we think more than $500 million of revenue this year. We launched an MTF that we're operating for Goldman Sachs over in Europe. We finished the migration of all of our NYSE Arca businesses to the Mahwah data center, and although we can't announced the name, we have our first major infrastructure sale to a truly Tier 1 financial services company. So the point of this slide is we're not taking our eye off the ball by any stretch. This was all what was going on in the midst of this great quarter that I just reported on.

You can see the benefits of diversification here. The Liffe business as I said up about 30% from, Options continues to grow year-on-year, sequentially. U.S. cash, pretty steady, those of you in the room who pay more attention to that than some of the other businesses, you will know that it's a pretty volume-constrained environment right now. It's hard to imagine getting back to the volumes that we saw a couple of years ago anytime soon, and remember that just around the corner is the Citigroup reverse split and for those of you who pay attention to the U.S markets, that would be another volume dampener in that business. But you can see we're holding steady there, and European cash continuing to improve.

At the same time we've been doing all that, growing our business, investing in our business, investing in new initiatives, disciplined expense management continues. So you can see that trend from last year's first quarter to the fourth quarter to this quarter, expenses continue to come down. And more importantly, as we promised, CapEx is coming down. A lot of our CapEx, 2, 3 years ago was to finance the building of the data centers so we can obsolete the other data centers. That work is largely behind us. You can see the CapEx returning to more normal levels. We've committed publicly that CapEx will come in at a more normal level of around $200 million or perhaps a tad less. We're well ahead of that for Q1, $36 million of CapEx, which was quite different than a couple of years ago.

And on the right-hand side of the slide, you can see that's translating to continued deleveraging for the company. So we finished Q1 at about 1.8x, Q2 was always a very good cash flow quarter for us, so I think certainly in the next quarter, you'll continue to have that number going even lower.

So that kind of wraps up Q1. Now for those of you who might think Q1 is a one-hit wonder, the next section of the presentation will tell you it's not a one-hit wonder. It's actually just simply a continuation of everything we've been doing for the last couple of years. So this is a depiction of really the strategy we've been talking about for the last couple of years. If you think about the center of what an exchange does at the center of what we do is the markets. And no matter how we change our strategy, no matter what else we talk about, core to what we do is those markets that we operate. We believe that operating those important markets around the world, it gives us the opportunity to get into these other businesses.

Now as you take that center of the circle and you go out, I know some of this may be hard to read, some of those businesses on that first edge of the circle, our businesses that exchanges here have historically been in, or it's fairly easy for them to get in. It might be the Listings business. It might be the fact that when you run the markets we run, you naturally have a global client base on both the buy side and the sell side. Because of the data centers we have and the other technology assets we own, it's easy to be a provider of more than just a matching engine or co-lo services. You can really be an infrastructure provider and obviously exchanges have always been on the data business.

So what we're trying to depict here is the part of the circle that's dark blue, those are businesses that we've either been in or have gotten into in the last couple of years, and we feel like we have a very strong presence in those businesses. The sort of lighter blue is where we're trying to get there, like in the clearing business where we're trying to build out the post-trade portfolio, and the gray area or areas where we as a company, as much as we've diversified, we're simply not in those businesses and, yet we think people in our industry should be thinking of ways to get into those businesses. So think of this as really a depiction of the value chain that we think an exchange can access if it creates a strategy correctly.

We think this is evolutionary in our industry. We think it makes us unique from anyone else in the industry. And we also think it reduces the concentration risks, so we're not us reliant on transaction businesses that by their nature are very cyclical.

A lot of this speaks to recurring revenue that's not quite just about to today's volumes. I can remember when I first got here a few years ago, the only metric we really cared about on a daily basis was what was the volume in Tape A, B and C in the U.S. equity markets. It's a different story right now because we have a much more bulletproof business model.

So I wanted to give a couple of examples because those are great words, it sounds good, it's a pretty picture. We can use words like innovation, collaboration and everyone could say, "Okay that's interesting. Is it really coming to life? Is it really real or is that just an interesting articulation of a strategy?"

We got 2 examples on this slide that in my mind illustrate exactly what we're trying to do and why we think it's valuable, and why we think it's a differentiator. The first one I referenced on an earlier slide, it's putting NYSE Liffe U.S. together with NYPC. So we leverage our existing derivatives franchise. We get together with some of the biggest customers in the industry, right? We work with the regulators, we work with DTC, and we come out with what I think is one of the most innovative developments in the derivatives markets in the U.S. for probably my entire career.

This is a capitally efficient clearing model, it's single-pot margining. And you will see us continue to build this business over the rest of the year. At the chart on the top right, we only started this about a month ago, open interest in Eurodollars are already up to nearly $100,000. Volume is fluctuating between 60,000 and 80,000 contracts today. We think it's the most successful launch in history in terms of trying to penetrate the interest rate derivatives business in the United States. We've also launched treasury futures, not a lot happening there yet, but we think in the next cycle, in the June -- after the June expiry, we should start to see similar growth in Eurodollars. Now this is happening with hardly anybody connected yet. Some of our partners in the enterprise haven't even gotten fully connected yet so we think we've got a big opportunity there.

Another example of that collaborative innovative approach that we talked about, and to show it isn't just words, is what we did with the Amex Options business. We acquired the Amex Options business as part of the Amex acquisition in 2008. If we wanted to assign a value to the Options business, we would say it was roughly $100 million. That business had just under 6% market share in options when we acquired it. It now has roughly 14% market share. That was done in concert with some of the leading liquidity providers in the business. We put in the NYSE Arca technology. We used the floor that had been vacated the, old blue room, to some of your former members that is now the Amex options pit in the back. And that is another successful example of just changing things, making it better, innovating, collaborating, and look at the results.

We also think another great example of the strategy really coming into life is in our NYSE Technologies business. This is more than just being in the market data business, every exchange is in the market data business. What we're trying to say is between operating the markets, being in the data business, owning assets like NYFIX and Wombat and then coupling that with state-of-the-art data centers that are really mini-ecosystems, it is very easy to be a provider like no other in the space and the clients are starting to get it. You look at the bottom right, we're not trying to be the matching engine provider to every exchange in the world. The relationships we have with Qatar, Tokyo and Warsaw are deep, they're broad, they involve not only the matching engine but really the entire exchange architecture, the SFTI network, the NYFIX network, the data distribution tools. And in the case of someone like Tokyo, for example, it's even leading to cross-listing of derivative products. This isn't about quantity it's about quality. And you can see getting business from people like Goldman Sachs, Jefferies and Citigroup, we're starting to prove that this model of being an infrastructure provider, being someone that the sell side can outsource to as they think about managing their own businesses, being someone other exchanges can count to be their partner not just their vendor, it's really starting to work.

Now we've also been enabling the strategy by getting more and more productive. Left hand side of the slide, headcount continues to go down '07, '08, '09, '10, yet we're doing more than we've ever done. Productivity for employee we've gone from just under $700,000 to nearly $850,000. And you can see on the right-hand side of the slide where that leaves us. Exchanges that are a little more focused on equities, sort of in that $600,000 to $700,000 per employee range, pure play derivatives above $1,100 per employee. We think that combination of DB1 and ourselves, if we get it right and we see the revenue opportunity, we think we're going to be punching much more at the CME and ICE weight in terms of the $1,100, $1,200 -- I'm sorry $1.1 million, $1.2 million per employee if we can put those 2 companies together successfully.

Now we also want to be very conscious that a big part of efficiency is keeping focus on our costs. If you think about the cost when we did the NYSE Euronext merger, the expenses of the company were just about $1.85 billion. Our guidance for this year is $1.65 billion, so $200 million lower. But what we're trying to show on this chart, I don't want to get into too much detail, but what this chart shows you is it's not likely stood still in 2008, 2009, 2010. We bought the American Stock Exchange. We bought Wombat. We bought NYFIX, we invested in data centers. We build out the SFTI network. We re-insourced source our technology in Europe. We built out the NYSE Liffe U.S. platform. We invested in NYPC. We invested in some clearing initiatives in Europe. And in spite of the cost associated with all those and the revenues associated with all of those, expenses have still gone down $200 million or so and it's really more like $700 million. Because all those other investments were made -- obviously NYFIX, Wombat, the AmEx had costs associated with them. So we think we've managed the cost quite effectively over the last few years. And it's starting to translate into results. Here are the results going back 8 or 9 quarters. You can see this was the best quarter we've had since 2008, this quarter we just completed.

The markets also beginning to take notice, if you go back 2 years, our multiple was around 9. Our multiple is now 13. So we've been keeping pace more or less with the S&P, and you can see for most of the industry, multiples have gone up. Our multiple has expanded on a percentage basis more than anyone else in the industry in the last 2 years. And the shareholder returns, for those who of you who have stuck with us last few years, you would understand, we've outperformed the industry.

To be fair, this chart stops at February 8. You will remember the deal leaked on February 9, if you took this through the end of first quarter, you can add 15% to 20% to all of these numbers. The stocks have about 15% to 20% since the deal leaked on February 9, since the merger leaked. But you can see, if you want to think a 12-month, a 24-month view, we've been delivering total shareholder return. So that's a little picture of, kind of, Q1. And then what the last 2 years have looked like and how the strategy is coming together. Now what I want to talk about the close before I turn it back to Mr. Hessels is: Why are we so excited about the merger, why do we think that's the accelerator. So I'll go back to that picture I showed you a little while ago.

This is a picture of where we stand right now. So we've spent the last period of time with the board really going back to 2009, thinking about all the possibilities in a competitive landscape: Who could we combine with, what can we think about, what do we think about out stand-alone situation, were there are opportunities to accelerate our stand-alone situation. So if you go back to that slide I showed earlier with this picture, you'd understand where we feel we have a strong presence, where we're getting there and where we're really not quite there yet by any stretch of the imagination. So in our view, if you think about combining with the DB portfolio, we have a strong presence literally everywhere on the value chain. So why is that? It looks like a convenient color thing. It just fits in beautifully. Think about the areas that change from light blue to dark blue or from gray to dark blue. In our Clearing businesses for example, we think post-trade services are critical going forward to what an exchange is going to need to do.

We were getting there on the clearing side, that was going to position us to be able to provide more capitally efficient solutions like NYPC, more risk management solutions, which are becoming increasingly important. Euronext has a world-class realtime risk management system. It's arguably the best in the world. We don't have to build ours. We get that by combining these 2 companies.

Settlement and custody, collateral management asset servicing, we didn't really have anything in our near-term plans get into that business. A very stable business. We think we can really help Clearstream’s a lot by combining these 2 companies. That rounds up that part of the portfolio.

One of the areas, other areas, where we felt we were a little light was on the analytics side. The DB analytics business with its stocks franchise, world-class. So from our point of view, if you think about this chart, not only does it let us expand the circle from the markets on out, it lets us really embed ourselves with our customers in a way that we couldn't have before. Whether it's a buy-side customer, a sell-side customer, an exchange, you look at all the services, we're now in a position to provide. No one else can provide these services. We can go have a conversation with the big sell-side customer or a big buy-side customer, or one of the global exchanges around world that I promise you no one else can have because we can bring all these assets, all these services to bear. That's what we think is so exciting.

Now what we're also excited about is it further diversifies the business. We had this merger executed, the left hand piece of the slide shows you what the revenue breakdown would be and how it's distributed geographically. We're excited about the fact that it's 30% in the U.S. and 70% outside of the U.S. We think that's the right direction to be going in. That looks like Coca-Cola, that looks like Procter & Gamble, that looks like GM, we think that's the future. If you're going to be an international company in an increasingly global capital markets business, you better have a diversified revenue base. Most of the opportunities, most of the issuance, it's coming in the more emerging part of the world. Let's get ourselves positioned to be in there now.

We also like the right hand side of the slide. We're not dependent on 1 product anymore. We're not dependent on 1 area. The largest business is going to be less than 40% of our revenue. So no businesses is more than 40% and that Market Data and Technology business, 14% probably our fastest growing business. So you can see, we've got a nice rounded out portfolio if you want to look at net revenue contribution or EBITDA contribution.

Now let me just talk about the 4 businesses this is going leave us with. And we talked about a lot of this when we did the first announcement on February 15.

Let's start with the Derivatives business. Think of the complementary nature of the 2 portfolios. We've got in country equity derivatives, DB has pan-European equity derivatives. We've got the short end of the European interest rate curve, DB has the long end of the European interest rate curve. You put those together, you put that in 1 clearing house, the single biggest thing we're going to be able to deliver to sell-side customers right out of the gate once we get these 2 clearing houses integrated. We think conservatively $3 billion of capital we will be available to return to the street in the form of margin interest. They have to post it in 2 different places now, simply by putting these clearing houses together and giving them appropriate and realtime risk-managed offsets, $3 billion of capital goes right back to the street. And with the intensity that they have with Basel 3 coming with the changes in their businesses, you can imagine how important that is to them.

In the meantime, we're going to be creating the most diversified derivatives business in the world. If you look at billions of contracts a year, futures and options, we will be the market leader. A terrific U.S. options business, a terrific European options business, a terrific European futures business poised to be even more global.

On the right-hand side, we already talked a lot about the Cash and Listings business. We will be the biggest center of capital raising and issuance in the world. We already are, this makes us even stronger.

On the European landscape, no one is dominant, but if you take our 17% market share, DB’s 11% market share, we're about a 28% market share in the pan-European business. And you've got the LSE, you've got the BATS + Chi-X combo, who are punching at a similar weight, but we think we're very well positioned there. We have companies listed with the 2 exchanges combined from roughly 60 countries around world. And the countries that DB services in terms of Central and Eastern Europe is the place where we'd like to do better. So that's very complementary. We've got Asia, we've got Latin America, they've got Central and Eastern Europe, 60 different countries listing on our capital markets platform and issuers around the world. And it is a who's who of leading companies around the world.

We've also got this terrific Technology Solutions business, our commercial technology business. You take in the DB Analytics business, the Stocks business, our SFTI network, our NYFIX network. This is just going to be a fantastic combination. There's no question about it. Clearstream, I frankly, have a lot to learn about. The businesses that I've grown up in have never really been focused on the settlement and depository part of the business. It is a steady revenue generator, it is a steady earnings generator and we think with the access we got to the buy-side network, our sell-side network, our issuer network around the world, we think we can really help Clearstream identify some new opportunities going forward.

So to conclude in the next few slides here. What do we think we can do with this company? We think this is going to be the best company in the industry, and we think it's our chance to really work together with our colleagues at Deutsche Boerse. And prove to everybody that this really is everything we said it could be.

So on the top left, we've got first quarter earnings that both companies reported this morning. You can see nearly $500 million just in this quarter in terms of net income. For both of us, it was a great quarter. They announced their earnings just before our call. Michiel correct me if I'm wrong on this, revenue is up 8%, expense is down 9%, earnings is up 36% versus year-on-year, cost down, guidance down another EUR 35 million for the year, accelerating some efficiency plans they already had in place, just a terrific quarter both of us beat the analyst estimates by 10% to 15%. Is that right, Mike? So a terrific quarter, we haven't given ourselves any credit for that on the top right. Those are still the analysts' estimates for full year results for 2011, even though first quarter was better for both of us. And then you can see on the bottom right, these are 2 dividend-paying companies that pay out that $885 million is roughly a 50% payout on last year's earnings. So I think you've got 2 very steady dividend-paying companies in the mix here.

So what do we think we can do, that's how we're doing standalone. What do we think we can do with this company? First, we're working very hard to get all the regulatory boxes checked. You can imagine how many approvals we have to get around the world. We've been working feverishly since February 15 to make a lot of progress on that. We've had meetings with over 100 policymakers. We've met with key government officials and regulators all around the world. We've had our initial meeting with the DOJ, we're already in second request mode with them. Our college of regulators, which is the 5 European regulators who oversee us in the business as we operate in Europe, we've had several meetings with them with many more planned in the coming weeks. We've had our initial CFIUS meeting. We filed our F-4 with the SEC. And we've been working very closely with the competition authorities in Brussels who have committed to us and we're working very collaboratively with them on almost a daily basis. We make our final filing by mid-June. And that keeps us on track for a 2011 closing for the merger.

Now while we're busy doing all that with 1 team, another team has been working hard on the integration. Remember that when we went into this in February, we had not spent as much time as we could have because our view was taking 3 or 4 more months, doing a deeper dive on synergies, bringing a lot more people into the loop, we did not think that was sensible. We felt we have plenty of time between announcement and closing to get hard to work on figuring out where the synergies should come from. So we now have integration teams working together, 5 or 6 people on both teams. They spent 2 or 3 days together in Frankfurt last week. They continue to validate and quantify the synergies. And what they've come up with really in the last couple of weeks, I'm about to show you, is an increase in the synergy target that we first announced and a slight acceleration of when we think we can deliver them. We believe of the synergies we can achieve, roughly 1/3 in '12, 1/3 in '13, 1/3 by the end of '14. So our initial guidance on this was roughly EUR 300 million.

We're moving it up to EUR 400 million. And on the right-hand side of the screen, we feel we owe everybody a clear explanation of where that increase came from. One of the key decisions we've made on the last couple of weeks that we had not made on February 15 was: Could we find our way to a common trading and clearing infrastructure? As I learned when I first got here, people get very emotional about the technology that they've built. They're proud of it. They're excited about it. And their general feeling is "your right we should try to get to 1 platform and as long as you pick mine, I'm totally okay with that." Right?

So what you have to try to focus on with everybody is there's no winners and losers in this. The clients will want us to get to a common architecture. It would be better if we got there sooner rather than later. I personally like to not to push that before February 15. I could see that not everybody was ready really on either side to make that decision.

So I think the biggest thing the integration team has accomplished last week is we can get to a common trading clearing architecture infrastructure. That means a common customer gateway to get into the house, a common trading platform, which will evolve over time for both cash and derivatives. The world-class clearing systems that we get with Euronext. And then the data center decisions are still to be made.

Quite frankly in the U.S. it's a lot easier. Our friends at DB have nothing like Mahwah, so that's an easy decision in the U.S.

In Europe, it's a little harder because as proud as we are Basildon , they're equally proud of the data centers that they have in Frankfurt. So we still got work to do there. There could be more to come there. But I think really the biggest change in the synergies in the last couple of months has been going to the common trading architecture and being able to go deeper in the organization. We hadn't really looked down deep into the organization when we announced the merger. We figured we had plenty of time to do that, and now we're finding more and more savings and corporate areas as we go down. We haven't really changed the clearing synergies. Our view was: We were working on it, no reason to continue, they have a world-class clearing system; I think that's going to serve us very well.

The other thing I really want everyone to focus on is we're creating a company that is just going to have more financial flexibility than anyone in our industry. If you think about where we're going to end up just on the pace we're on right now, we'll be in the neighborhood of 1.3x levered at the end of 2011 before we put the 2 companies together. So before we have a chance to extract any synergies, run the company more efficiently, we should be at roughly 1.3x by the end of the year. Now that includes the 2 companies, remember paying a nearly $900 million dividend along the way if both companies just maintained their existing dividend policy.

If you think about where we should be at the beginning -- as early as the end of '12, we will be less than 1 to 1 debt to EBITDA. And if again, if the companies just maintain their dividend policy, it would be a dividend in excess of $1 billion next year. And what we try to show at the bottom of the page is, well, plenty of flexibility. If we want to be a one-time celebrity company, we'll have $1.7 billion of flexibility. If we're happy at 1.3, we'll have $2.8 billion of flexibility. The company will be positioned to focus on shareholder value, be it in the form of traditional things like buybacks and dividends or, to be able to invest in new growth opportunities around the world and in all these different asset classes that we've positioned ourselves to do, pretty exciting.

Now what could that lead do? We've done some sensitivity analysis here to kind of depict what the path to value creation could be. I won't spend too much time on this slide, but this is an important take away. Top 2 numbers are simply what the analysts think we're going to make this year. And the next line the 532 simply says -- as you get the synergies out on both the expense side and remember we've committed to EUR 100 million of revenue synergies, more work to do there. We think we can find more there but I think specifically I'm going to stick with the EUR 100 million for now because that's going to be easy to get most of them will simply come from the clearing integration. You take the after tax benefit of those synergies and it's not hard to envision us as a company that earns $2.4 billion after taxes.

NYX shareholder share of that at 40%, you see the 960 on there with our current shares outstanding that translates to something like $3.67 a share. Now our current multiple is 13, if you stick with that multiple of 13, you're thinking about a stock in the mid to high 40s. And if you believe that by taking these 2 companies, putting them together, we can have some multiple expansion, which we believe is another way to create shareholder value. We don't think that's out of the question either. But even if our multiple just stays at 13, you can see where our mid to high 40s stock, and we're well on our way to really be able to create value. So we're going to work with the analysts very closely. We think what we need some of the analyst to work with us, and they've been great so far, is to really work on models to help us be as transparent as we can be about all of this. You can see what it could mean for dividend policy, too. If you believe both companies are just going to maintain this 50% payout ratio, it's $1 billion next year, it's $1.2 billion as we grow into the synergies and as we build out the company. So you can really see there's plenty of opportunities to create value for our shareholders. We remain intensely shareholder focused.

So in summary before I turn it back to Jan Michiel, a terrific first quarter that shows we continue to execute really just driving the business forward, executing the strategy. We are committed to continuing to do that. We haven't let anybody down. Everything we say we're going to do, we're going to do. We've over-delivered on the synergies in NYSE Euronext. We've over-delivered on the synergies in Amex, everything we've done we've over-delivered. We love our strategy. We love standing alone. We think we could not have found a better partner than Deutsche Boerse, as we surveyed the landscape to accelerate that strategy and we believe that deal is absolutely actionable.

Between now and July 7 on the shareholder vote, we will be accessible. We'll talk to anybody who wants to talk to us. We will be meeting with shareholders, and we'll be listening to the questions they have for us. And we'll be talking about what we think is a compelling value creation opportunity.

So I thank everybody for listening to me. You can tell how excited we are about not only the quarter but the last 2 years and what the future holds. So thank you, all, for being here today. Jan Michiel, I'll turn it back to you. Thanks.

Jan Hessels

Thank you very much, Duncan. You heard it was a terrific impressive presentation. And certainly this is material for later question-and-answer session. But we first will turn now to the formal business of the meeting.

Anyways, the Euronext Corporate Secretary, Jennifer Ginnis, who will serve as Secretary of this meeting. And at this time, the Secretary will present the affidavit regarding notice of this meeting. Mrs. Secretary?

Jennifer Ginnis

Mr. Chairman, I submit the affidavit attesting to the fact that on March 18, 2011, notice of this meeting was given to the stockholders.

In addition, there is present at this meeting a certified list of those stockholders eligible to vote. I also state that representatives of MacKenzie Partners who have been appointed by the board to act as inspector of elections at this meeting are present and they have taken their oaths.

Jan Hessels

On behalf of the Board of Directors, I would like to thank stockholders who returned their proxies. And we have a proxy committee that votes as instructed by the stockholders or if no instructions are given, votes as recommended by the Board of Directors. The proxy committee is comprised of myself, Duncan and Marsh. Jennifer, do we have a quorum?

Jennifer Ginnis

Yes, Mr.Chairman, we have a quorum. Holders of at least 207,530,617 shares or 79.44% of the company's outstanding shares are present in person or by proxy and we may proceed.

Jan Hessels

That's a quorum, thank you. We begin with matters requiring stockholder action that are set forth in our proxy statement. Item 1, first proposal is the election of 16 directors, each of whom has been recommended by the board. At this moment, I would also like to note that Jean-Francois Theodore, one of the architects of Euronext, and one of the very principled contributors to our merger here is not standing for re-election for the 2011-2012 term. He provided invaluable expertise and vision to the company and we are grateful for his service to the company and its stockholders.

The directors who are standing for re-election includes Duncan, Marsh, myself, as well as those whose name I will now call. Directors, could you please stand as I call your name. Mr. Andre Bergen, Ms. Ellyn Brown, Ms. Patricia Cloherty, Sir George Cox, Mr. Sylvain Hefes, Duncan McFarland, Jim McNulty, Ricardo Salgado, Bob Scott, Jack Tai, Rjinhard van Tets and Sir Brian Williamson.

In addition, we have 1 director nominee who is standing for election at this time and for the first time, it's Dominique Cerutti, seated to my left here. The proxy statements list all the nominees and describes their backgrounds and unique qualifications. No other individuals have been nominated in accordance with our certificate of incorporation and bylaws, and I declare the nominations closed. As set forth in the proxy statement, the board has recommended vote for each nominee.

The second item is a proposal by the company to ratify the Audit committee's appointment of PricewaterhouseCoopers to serve as our independent auditors for our fiscal year ending December 31, 2011. And I hereby introduce the proposal.

As set forth in the proxy statement, the board has recommended to vote for this proposal.

The third item is a proposal by management to adopt simple majority voting for certain provisions of our certificate of incorporation that currently require an 80% stockholder vote to amend. And I hereby introduce the proposal. As set forth in the proxy statement, the board has recommended to vote for this proposal. You may recall at our 2009 and 2010 annual meeting of stockholders, our stockholders were asked to vote on stockholder proposals requested for to take the steps necessary to replace the stockholders supermajority voting provisions in our charter and bylaws with simple majority voting provisions.

These proposals successfully passed at the 2009 and 2010 meetings. The only stockholders supermajority voting provisions in our charter and bylaws are those governing the amendment or appeal of specific governance and control related provisions discussed in detail in our 2011 proxy statement.

After considering our regulators’ position, specifically the European College of Regulators' views with respect to the supermajority provisions and the results of the stockholders votes at our 2009 and 2010 annual meetings, the board determined that it would be in the best interest of the company and our stockholders to take all steps within its powers to eliminate the supermajority provisions. If the policy of regulators indicated that it would not object to such elimination. They have the final word.

To this end, the board is proposing approval of the proposed amendment and restated charter amendment as set out in the 2011 proxy statement. The relevant bylaw amendment was already approved by the board and our regulators earlier this year.

If approved by our stockholders, the proposed charter amendment will be filed for regulatory approval. I can assure you that the board believes that it's taking all the steps within the scope of its authority to respond to the concerns regarding supermajority voting as expressed by our regulators and our stockholders.

That brings us to the fourth item, the say-on-pay vote, the advisory stockholder vote on executive compensation. Stockholders are being asked to vote on the following resolution: Resolved that the stockholders hereby approve the compensation of NYSE Euronext executive officers named in the summary compensation table. As disclosed pursuant to Item 402 in regulation S-K, with disclosure includes the composition Discussion and Analysis and the composition tables and other narrative executive compensation disclosures. As set forth in the proxy statement, the board has recommended a vote for this proposal.

We seek your support and think that this is appropriate because we have a comprehensive executive compensation program that is designed to link our executive’s compensation as closely as possible with the company's performance and to align the executives interest with yours as stockholders. Although this proposal is not binding upon the company or the board, we certainly will carefully consider the stockholder vote on this matter.

Item 5 is the say-when-on-pay advisory vote, which determines the frequency of the advisory vote on executive compensation. As set forth in the proxy statement the board is not making a recommendation on whether the say-on-pay vote should occur every single year, every second year or every third year. Though the vote is nonbinding, we would like to consider the view of you, our stockholders, before making a determination about how frequently to hold the say-on-pay vote, and that's why you can vote on it.

This next item is a stockholder proposal from Mr. Kenneth Steiner, regarding the power to call special meetings. At this time, I call upon Mr. Steiner to present his proposal. Mr. Steiner, may I remind you that there is a 2-minute limit and we ask that at this time you confine your remarks to your proposal and save any additional remarks, which you will have some, for the Q&A session at the end of the meeting. Mr. Steiner, please proceed.

Kenneth Steiner

Mr. Chairman, my proposal is on Page 70. I'm Kenneth Steiner, I own 1,000 shares. And I'm proposing that we be able to call special shareowner meetings and the proposal is as follows: Resolved, shareowners ask our board to take the steps necessary unilaterally to amend our bylaws in each appropriate governing document to give holders of 10% of our outstanding common stock the power to call a special shareowner meeting. Special meetings will allow shareowners to vote on important matters such as electing new directors that can arise between annual meetings. I believe that the merits of this special shareowner meeting should be considered in the context of the need for additional improvements in our company's corporate governance, which are stated in the supporting statements, which everybody can and should review. And I think they're very meaningful and I urge everybody to vote for the proposal.

Jan Hessels

Thank you very much. As set forth in the proxy statement, the board has recommended a vote against your proposal, but we haven't voted yet.

Item 7, the seventh and final item is also a proposal by Mr. William Steiner, a stockholder regarding the ability of stockholders who take action by written consent. Mr. Kenneth Steiner has been designated to speak on behalf of Mr. William Steiner. May I call upon Mr. Steiner to present his proposal.

Kenneth Steiner

Mr. Chairman, this is proposal number 7 on Page 71: Resolved, shareholders hereby request that our Board of Directors undertakes such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting in which all shareholders entitled to vote were present and voting. I believe that taking action by written consent in lieu of the meeting is a mean shareholders can use to raise important matters outside the normal annual meeting cycle. Various studies have supported the concept that this and other empowering governments features enhanced shareholder value. I believe that this proposal is one great support at other companies, and I believe it would be a fine addition at our company and especially if we take notice of other flaws that I'll discuss later in our corporate governance. But I believe that our shareholders should be able to act by written consent and everybody can review the supporting statement and I strongly urge you to vote for this proposal.

Jan Hessels

Thank you very much, Mr. Steiner. As set forth in the proxy statement, the board has recommended to vote against his proposal. The polls are now open and we will proceed to the voting, but if there are any questions related to the specific items that will be voted now, you can post them and I remind you again that there will be a general Q&A session after the official part of the meeting. So please restrict your questions to the items that are to be voted upon now.

Unknown Speaker

Yes, may I have the microphone? Somebody will have to hold the microphone, I have my hands full. Somebody hold the microphone for me. And I'm Evelyn Y. Davis, Editor of Highlights and Lowlights. And I think, appropriate at this time, people should know, I am an upper-class Barneveld Holocaust survivor. That's something you'll never forget when they have the thing here about the Germans, they're wanting to be the part of us now. And also, what -- I do have a question here, why doesn't -- Duncan, why didn't you speak to Mr. Greifeld and discuss this? Now you come down. I spoke to him. I had them send me this propaganda. I don't think -- I don't want to have anything to do with them. All right, but I did talk to him. I talked to him...

Jan Hessels

Mrs. Davis, I have to interrupt you. I specifically asked you to limit your questions to the items that we're going to vote upon.

Unknown Speaker

No, we're talking here, a part of directors, and I -- no other company that they don't like to speak separately on directors and accountancies, no. I have stock in 80 companies. No other companies doesn't like to speak on these items one by one, only here. Now, Jan Michiel, he is of Dutch origin just like me. I am surprised at you. And I have to go soon of as similar things [indiscernible] what you call with Chrysler. But I must say that the Germans went out of their way to be nice to me at the meeting. In Germany, the company doesn't have to have any of their...

Jan Hessels

Mrs. Davis, we're both civilized people. I will now cut you off, and you can come back with all the questions you want to ask about the intended transaction with Deutsche Boerse in the part of the meeting that we'll reserve for it. But at this moment, there will only be questions or comments on the items that we're voting about. Thank you very much. Is there another question on the items that we will have to vote upon?

Unknown Speaker

[indiscernible] I have a question there.

Jan Hessels

That is relevant.

Unknown Speaker

This whole thing -- About the accountants, I feel this whole thing has been nothing but eventful for lawyers, accountants, PR people and others. But with the middle piece, so far, and for lobbyists, they're having a field day. They've never had it so good. They're going to stretch this as long as they can, because once this is settled, the clock will stop. So far what have been the legal fees?

Jan Hessels

Your question is, why are we reappointing him? Or what have the fees been?

Unknown Speaker

No, about the accountants' spend that's in the books. How much are we spending on this?

Jan Hessels

Okay, that is a question. I think we can answer that. Shall we ask our CFO to answer that question? Get a microphone.

Michael Geltzeiler

In the first quarter, we announced that we spent $15 million in total on the merger, 1-5. For everything: for the M&A investment advisers, for lawyers, for accountants, for PR, et cetera...

Unknown Speaker

Well, that is so far. And I mean, this is just eventful for the match. I mean, they're going to tell you not to settle this because then the clock stops ticking. And what about the lobbying fees?

Michael Geltzeiler

That's what I was going to say. And most of the fees for the transaction are contingent on the transaction actually closing so that we paid that so far in the first quarter. Again, most of the fees are success based, wait, based on whether or not the transaction happens.

Unknown Speaker

And on the directors, were they unanimous to vote on something or not vote or not to listen to Mr. Greifeld’s views.

Jan Hessels

That's a different matter, but you know from the press releases that this Board of Directors has still, so far, always voted unanimously. Any other questions on the agenda?

Unknown Speaker

But I'm saying unanimously but at least any discussion amongst the directors about this deal.

Jan Hessels

Sorry, that is for the general Q&A session, if you want to ask that question. We limit it now to...

Unknown Speaker

That's what you say. This is the only company...

Jan Hessels

And I now have to shut down the microphone, I'm sorry. You're a very appreciated shareholder, you're unique, but you're stubborn, I'm stubborn, we both have to play by the rules. You'll come back, don't worry. Where are we? Mr. Steiner, where are we?

Kenneth Steiner

Thank you. I'm going to make a short statement. You can take it as, if you want, in a form of a question, so you could address the concerns that I'm raising. But I voted against the directors, and I will say I appreciate some of the changes you've made in governance in response to some of my proposals in the past and the performance of the company in the recent year, but I believe that these directors have not done the appropriate thing with regard to the merger. We have our shares now being sold or converted at a very low and cheap price, and their complete lack of any kind of meaningful premium. I believe that there was a lack of consideration and/or the ignoring of alternate bids and transaction possibilities, which we didn't even have the opportunity to consider as shareholders.

There's a huge breakup fee, I believe, over $500 million that we would have to pay, if this transaction doesn't go through, that we've had no choice on. This acts as a deterrent to better offers, and I believe it's a huge waste of our money. I believe that the company is now selling off or merging its shares at a very low price in relation to its earnings and other multiples, especially in light of where the stock market is today. So again, with all due respect, I'm going to say that I assume that the directors have their opinion, and I have mine. But I will say that in my opinion, based upon everything that I've heard, everything I've read, I believe that this merger is grossly unfair to the shareholders...

Unknown Speaker

And let's object here [indiscernible].

Kenneth Steiner

All right, I'm not finished, and I'm keeping it under 2 minutes, please. I voted against the directors. I believe that they should be removed and replaced with those who can get us the appropriate value for our shares. Thank you.

Jan Hessels

Thank you for your explanation, and we'll do everything within our capabilities to make you change your mind, even if you would have voted against us before. Any other comments on the agenda points? No? That means that the polls are now open, and we'll proceed to the voting. If you would like to vote here by ballot, please raise your hand and an usher will deliver a ballot to you. Also, if you have already voted by proxy either by mail, phone or Internet, there is no need to vote by ballot now, unless you wish to change your vote. Mr. Steiner your last chance.

[Voting]

I guess it's almost time to close the polls. Has everyone had an opportunity to vote? And if you have completed your ballot, please raise your hand, and an usher will collect it. And I will wait until no more hands are raised.

[Voting]

Okay, are there any hands raised, any ballots to be returned, still? I see no more hands up in the air -- yes, in the back, there. Can I close the polls? No? Okay.

[Voting]

Can I close the polls?

[Voting]

That seems to be the last one. Thank you very much. Polls are now closed.

While the inspector is counting the votes, I would like to introduce the NYSE Euronext Management Committee to you. As noted before, Duncan is, of course, CEO; Dominique Cerutti is President, Deputy's CEO -- but the following people are also members of the NYSE Euronext Management Committee, and please stand as I call your name. Roland Bellegarde, is not here, I believe, he's working in Paris as he should be; Andrew Brandman, EVP and Chief Administrative Officer; Mary Brienza, EVP and General Auditor; Philippe Duranton, Group EVP and Global Head of HR; Michael Geltzeiler, Group EVP and CFO; John Halvey, Group EVP, General Counsel; Garry Jones, Group EVP, Head of Global Derivatives, who is working in London; Luis Laginha de Sousa, who is Chairman and CEO of Euronext Lisbon; Catherine Langlais, who is General Counsel of Euronext in Europe; Larry Leibowitz, Chief Operating Officer, known from local TV here; Vincent Van Dessel, Chairman and CEO of Euronext Brussels, where are you -- he is in Brussels, good news -- and Cees Vermaas, CEO of Euronext Amsterdam, is here. Okay, then we hopefully can go to the preliminary voting results. Is the inspector ready to present his report?

Unknown Executive

Yes, I am. Due to the buying of proxies and ballots, it will take until tomorrow to verify the votes and tally the final count. However, based on the proxies tallied and verified prior to the meeting, I can confirm that a quorum is present and that each of the director nominees has been elected, the appointment of PricewaterhouseCoopers as independent auditor has been ratified, the management proposal to adopt simple majority voting and the certificate of incorporation was approved. The say-on-pay vote, the advisory stockholder vote on the executive compensation, indicates that the stockholders have approved the company's compensation arrangement. The results on say-on-pay vote, the advisory stockholder vote on the frequency of the vote on the executive compensation, are as follows: 83.82% of shares voted for 1 year, 1.34% voted for 2 years, and 14.85% voted for 3 years. The stockholder proposal regarding special meetings has been approved, and the stockholder proposal regarding action by written consent has also been approved.

Jan Hessels

Thank you very much. The final vote results will be posted on NYSE Euronext website as soon as possible, in the Investor Relations section, and timely reported on a Form 8-K filed with the SEC. And I'm sure you noted that the directors have all been reappointed, and based on our preliminary estimates, all have been reelected by well over 80% of the votes cast. So that's good news for us. There's also good news for Mr. Steiner. His both proposals were adopted by the shareholders. Congratulations, Mr. Steiner. And on the frequency on say-on-pay, there's a strong preference to do this every year.

I think we now have concluded the legal meeting requirements, and I hereby declare the formal meeting adjourned. But the meeting isn't over yet. We now come to the question-and-answer session. But before we begin, I want to address a question that is clearly on the minds of our shareholders right now. Why won't the board agree to meet with NASDAQ and ICE regarding their joint proposal?

Unknown Speaker

Now that's a right question.

Duncan Niederauer

We knew you were going to ask it, so let us address it, and then if you still want to talk about it some more, we will. Is that okay?

Jan Hessels

So again, the important question for all of us is, why won't the board agree to meet with NASDAQ and ICE regarding their joint proposal? As the Chairman of this Board, I want to assure you that, throughout the process, the full board has intensely focused on creating real value for our shareholders, real value for our shareholders. As part of this process, we have carefully considered whether to engage in discussions with NASDAQ and ICE. But the board has unanimously determined that this will be the wrong thing to do for a number of reasons.

First, as you have just seen from Duncan's presentation, the Deutsche Boerse combination offers compelling value to our stockholders. You have seen it in terms of equity trading value, in terms of recurring dividend stream, strong balance sheet to start with, and we haven't even mentioned yet, it came up this morning, the very strong performance of Deutsche Boerse. We feel that the Deutsche Boerse share is a very strong, undervalued share based in a very strong currency area, and that should all be good for the exchange value. So point one is, compelling value on our side.

Point two, NASDAQ/ICE proposal is fraught with unacceptable execution risks. Their proposal is illusory. We simply do not think that they will get the necessary approvals to complete this transaction, and we can go in more detail on this during the Q&A session.

And finally, we believe their request for a meeting is a tactic. Principally designed to be disruptive to our combination and, therefore, we see no basis for which to meet with them. We are making substantial progress, as Duncan also explained, to what's closing our combination, and we remain focused on shareholder value creation. We look forward to continuing our dialogue with you in the weeks leading up to our July 7 shareholders meeting. And we thank you for your continued support.

With that, if you wish to ask a question, raise your hand, wait to be acknowledged, and please identify yourself and the number of shares you own. And restrict yourself to 2 minutes. Go ahead, Mrs. Davis.

Question-and-Answer Session

Unknown Speaker

I'm Mrs. Davis, I've had 4 husbands. I'm the owner of 200 shares, and like I say, I get to talk to Mr. Greifeld briefly, and I have him send me his propaganda. Now I've read this stuff, and I've come to the conclusion that this is not good for the shareholders. But I listened to his viewpoints. This is the thing, and the board should have listened to him, just like me. I'm considered -- people like me are not the most permanent independent shareholder in the world. And I listened to his stuff, and I don't want that but I didn't say, "No, I don't want to listen to you, I'm paid a term." And one of the reasons, too, I think, when I read his stuff, like they have the Baltic countries stock exchanges, like Vilnius from the Baltic countries. I mean, they are not in our league, those sort of things, there are very few rich people there. They have some other low-class, low-income areas where they have stock exchanges. We are in the upper classes, and this is absolutely ridiculous -- and then in Scandinavia, he has some. But they are not in the "prima classe." They are not the first-class exchanges. Now I'd like to know too, whether we had, before we talked to with the Germans and decided on that, have we talked like to some other upscale exchanges like Singapore or Mumbai, which used to be called the Mumbai Exchange, or São Paulo, Singapore. How we had any discussions with them?

Jan Hessels

Thank you for your question. Let me start, and then I'll turn over to Duncan here. At almost every board meeting, we talk about strategy. And we look at the competition, we look at the market developments, we look at the global capital market developments, and we look at who could be adds to our value, basically, and what combinations could be the very best. That's happening almost every board meeting, and I can assure you that, before we selected Deutsche Boerse to engage in discussions with, we had a complete overview of the field. Duncan, you can give more color here. Milano is already in bed, if I may use it, expression, with London.

Unknown Speaker

They are. Well, I said last year you should talk to them. You might have been able to get them. Now that would have been an upscale...

Duncan Niederauer

All right, Evelyn, I'll make you a deal. Since you started the 2 minutes, I'll whip at my response to 2 minutes, how's that? Because you -- she did come in out of the 2 minutes. So let's just go through some of the ones you mentioned, right -- because as Jan Michiel said, we talk about this at every meeting, we consider all the options around. São Paulo, the BM&FBovespa, about 50% larger than we are in a market cap basis, a higher multiple and already a pretty tight relationship with the CME, so I think we didn't really think there was much actionable we could do. Some in the group will help me remember, the LSE acquisition with Italy was 3 years ago, something like 3 years ago, 4 years ago, 2 years ago? The LSE acquired Milan quite a while ago so Italy's been off the table. Singapore was engaged with Australia, and remember, Singapore is roughly our size at a much higher multiple and, we think, much more of a successfully run exchange but that nearly is diversified as DB. And a lot of the Asian exchanges, and let's include India in that, would be very interesting, but there's nothing actionable now. Many of you in the room will remember we had a 5% stake in the National Stock Exchange of India, which is their leading exchange. We ended up getting out of that stake and selling it because we just didn't think there was much to do there. I think Asia's the long-term opportunity, but none of those exchanges are really available to be involved in any M&A at this time. So all under consideration.

Unknown Speaker

I have a point here. Duncan, we all love to have you here forever, but you know the Germans don't keep their word. Now how do we know -- and they have 60% of the stock. So if after one year, they want to tell you, "Duncan, you're no longer -- they're going to put one of your people. There's nothing to prevent them. They don't keep their word, just like I said. Even in the bona fide group, an elite group of 750, and I must -- there's just a chance [indiscernible] go -- keep us in the Barneveld Castle in the Netherlands. But they sent us anyhow to Westerbork and Theresienstadt. Now we were treated better than other people, but they were still bad enough. They don't keep their words. There were still bad enough! So I'm trying to say, how do we know they're going to keep Duncan? And another thing, too, remember Alcatel/Lucent? That was a French company, European. They told Pat Russo, she was a friend of mine, and she was the CEO of Lucent, and they promised her she could remain CEO as long as she want to. Yet after one year, they got rid of her. They put in one of their people. Now Duncan, how do we know they're not going to double-cross you? I want an answer to that.

Jan Hessels

Thank you for your question. And you will get an answer to that. And the relevant question, I think, is how will we keep the talents and the energy of Duncan, dealing with our German partners? I think the answer there is, point one, he is vital, and he realizes that he is vital to the success of this joint combination, and he is committed to act as CEO, deliver the synergies and be very heavily involved also in the strategy there and the daily operations. He will sign a new contract for that, for 4 years, that's all in the combination agreement. As you say, 60% of the Germans -- 60% of the company is German, that's not entirely true. Based on the present market caps, the exchange ratio is 60:40. But in the governance, in the management structure, there is much more of a balanced situation with a very international board, a very international management committee. And don't forget, at this time, about 60% or 65% of the total shares are owned by non-German investors. How that will develop? We don't know. But in the end, a lot of them in the U.S -- in the end, is the shareholders according to Dutch law, and this will be a Dutch top co. who decide who is in the board and who is CEO.

Unknown Speaker

[indiscernible] And your meeting is going to be held in Frankfurt?

Jan Hessels

No, it will be [indiscernible] in the Netherlands because that's where...

Unknown Speaker

How? [indiscernible] it's not going to happen, any more New York meetings?

Duncan Niederauer

We'll have New York meetings.

Jan Hessels

No shareholders meetings in New York.

Duncan Niederauer

We'll have some board meetings. You can come to one of our board meetings.

Unknown Speaker

That's laughter. Well they should have the shareholder meetings here every year, this is ridiculous, not in my native France or any other European country. And like I say, just my final comment: I love Duncan very much here, but there is one place I would like him even better. That would be at Goldman Sachs. He's a former partner there, and believe me -- we have to be sure, and we want to be – a week from Friday, we had a Goldman Sachs meeting. And the board there finally listened to me. You remember last year, at Goldman Sachs, that Lloyd Blankfein, I call him "Lord Goldmine," should get out.

Jan Hessels

I think this is out of order. No, you're running overtime, and it's not longer relevant to the meeting. Thank you very much. We will go to the gentlemen here for the next question.

Unknown Speaker

James Rothenberg, I'm the Managing Member of Complex Enterprise LLC, and the enterprise owns an excess of 50,000 shares. A couple of comments. First, market structure. We have a major defect that is ongoing. Based on SEC rules, stocks can decline 30% a day before trading has terminated. That means, in 3 days, the markets could be down 90%, in 4 days, 99%. The commission has refused to consider derivatives in connection with short selling rules. This is a matter of very significant urgency. I understand that Dodd-Frank priority at the commission but it is very important that -- we had a hint the other day with the potential Saudi oil interruption that we could have a significant interruption. I don't think anyone favors the structure where that event could occur. And it has to be changed. It has to be changed quickly. I suggest no more than a 10% decline a day, and then stop trading to give at least an opportunity for the markets to stabilize. Under the present structure, it may not be able to do so. Now let me turn to the Deutsche Boerse. I support it, and I think, for the reasons that Duncan has given. But I think there is additional measures that have to be taken. First of all, while the directors, have a fiduciary duty to the shareholders, the investors, particularly institutional investors, have a fiduciary duty to their shareholders. The comment by T Rowe Price yesterday was quite significant, noting the largest shareholders disclosed in the proxy statement. A 15% difference in price is significant, it's significant enough that it could compel institutional holders to vote solely on a financial basis on the deal. So something has to be done to eliminate that discrepancy. What can be done? I don't think the special dividend, the 1-time special dividend, is the answer. I think Duncan's dividend model is a good one, the increasing dividends with the cash over time. What can be done? Well, first of all, the exchange ratio can be modified, and I think it should be modified slightly. It currently is from 0.47 a share to a share. I think you should go to 0.50. That will also eliminate fractional shares. It will eliminate about 8.5% of the differential. The other tactic, which I think is extremely important, the board is taking additional -- just say no, which is permissible under Delaware law, because Revlon duties have not been activated, and under relevant case law, the board's advice, legal advice, is soundly grounded. But that's not the answer. What is the additional step that has to be taken? Well, Duncan's also said the best, the board, as well. The growth of this company is in futures and derivatives. The slice that you put up there are in futures and derivatives. The answer is a "Pac Man" counteroffer. We want the ICE. We wanted the ICE for a long time. We've said that we wanted the ICE, they haven't been willing to talk to us. They now not only are offering cash, they're offering stock. The door is now open, an opportunity is now available to make a counteroffer to take -- to bid to for the ICE in combination with the Deutsche Boerse. It's significant that we do so. That is a tremendous growth component. On every measure that you put up there, it is a very attractive acquisition. It also breaks up that combination between NASDAQ and the ICE. It will destroy that combination. So that's very important to do that. If it's necessary to make a total Pac Man offer -- well, the NASDAQ is loaded with debt. Maybe we bid $18 to $20 a share. The stock is selling at $27. They've admitted that if they can't put this deal through, they're devastated. So that stock should come at a discount, at a significant discount. But be that as it may, I think the way to handle this counteroffer is -- because of the fiduciary duty that the institutional shareholders have to their clients, and this is a 15% differential. 2 steps, the modest step is, increase very modestly the share ratio from 0.47 to 0.50, and second, make a Pac Man counteroffer. Bid for the ICE, and break up that combination. If you do that, I think there is a very strong possibility. Because there is precedent for the Pac Man counter-tender, there is precedent, and it is successful, and that's how you defeat that offer. You put the Deutsche Boerse combination through, and 1 or 2 things happen: their offer disappears, or you get the ICE, which is something you want, and you've wanted it for a long time. That's my suggestion.

Jan Hessels

Thank you very much. Duncan, if you talk about the Pac Man, and I'll talk about the fiduciary duties of the board.

Duncan Niederauer

Yes. I want to point out that James just broke Evelyn's world record, as well, so congratulations. That was impressive, that takes some doing. Let me spend 30 seconds on the market share, James, because you and I have talked about that. We know that -- I think the SEC genuinely knows what to do. I think they've actually done a good job since the flash crash of building a consensus around what needs to be done. I think it helps a little bit that we're coming up on the one-year anniversary because it will be a little more attention to the issue. But I also think we have to understand, it's kind of moved to the back burner, right? Because they're under a lot more pressure on all the Dodd-Frank stuff than they are on the day-to-day market structure stuff. As I said that many of you after it happened -- 9 out of 10 calls coming in to every congressman and congresswoman’s office was about the flash crash in May and June. None of the calls are about that right now. So there's not a lot of pressure. And I think you just have to understand, it's further down in the stack. But I do believe they know what to do, and I think you'll see some of the changes that you're looking for that will get at least closer to the answer that you're trying to get to in terms of market structure. In terms of the other issues -- look, we know between now and July 7 we have a lot of work to do because, whether it's a real value GAAP or perceived value GAAP, today's prices versus tomorrow's value, we think this is a pretty compelling – I’ll put this slide back up. No shareholder is arguing with us about the long-term value for shareholders that this can create. And you look at this picture -- boy, if I were competing with us, I'd want to disrupt this, too, right? I wouldn't want to compete with something that looks like that. That's going to be pretty tough to compete with. And we believe that part of the value is you know what you're getting with us, right? You can see where we're going, you have a reasonable confidence, you can count on a dividend stream. We'd like everybody to take that into account, too, because we think that's real value. You don't have to sit around wondering if someone's going to get synergies out. You don't have to wonder if people are going to de-lever. You know if we just maintain our dividend policy, you're getting a $300 million dividend this year, a $400-million-plus dividend next year. That's if we just stay the course, right? And we'd like to hear that all taken into account, as well. But I think we hear you that we know we have a lot of work to do to be with the shareholders between now and July 7. If you go back to February 9, it was $1 billion upfront. You've got the dividends streams I just talked about, you see how financially flexible the company can be, and yes, we think derivatives is a big growth area. I mean, let's just put things in perspective. $4.8 billion contracts in the Euronext Liffe, Amex options, Arca options, ISC options business complex, $300 million with ICE. So yes, it definitely helps us get more exposed through a growing area. But those are the facts, right? So I just think we have to make sure we understand what we're thinking about. And the last point before I turn it over to Jan Michiel for anything he wants to add about how we've addressed that since then, is if you think about changing the ratio, that's everyone's obvious reaction. Just remember, let's not be penny-wise and pound-full a share right. If we push that ratio too far, and the other side doesn't get to vote, as happy as I am with the standalone situation, we would hate to miss out on the accelerating opportunity because we just got a touch too greedy on the ratio. To me this is about short-, medium- and long-term shareholder value creation, not just today's value creation opportunity. That's what I'm saying.

Unknown Speaker

[indiscernible] point you emphasize. I think the fair, the anti-trust analysis. We face a much greater problem than Europe. They are far more supportive of competitors and customers, and particularly, monopoly in clearing raises very serious issues on the European side. And as exemplified in the Microsoft and Intel and other antitrust issues in Europe. In the United States the situation is different. With good regulation ATS fractionalizing the markets, it's much harder to make the argument that in the cash equity side, that New York, even NASDAQ, has lost a very substantial percentage of their market share. And in addition, the listing issue, a very carefully calculated strategy yesterday reduced the listing fee by NASDAQ if they merge. So I just wanted to point out that, while the exchange has raised and Duncan quietly done so about the regulatory antitrust issues, I think on balance that, maybe, we will have a harder time in Europe than NASDAQ will have in the United States.

Duncan Niederauer

Yes, I would have -- I mean, I'm happy to spend more time with you, Jim. I think that analysis is a little incomplete, but I'm happy to have spent some time with you because I think there is actually a lot we can offer with the combination that delivers a lot of value that's real to customers and shareholders. So I'm not sure -- I for one don't agree with your analysis, but I'm happy to follow up with you separately, if you'd like do. Jan Michiel, before we move on to it, do you want to add anything?

Jan Hessels

I think you said most of it. But you did mention the so-called 50% premium. I think the essence here is that our offer has real value, with conditions we believe can be met, with reasonable expectations that can be met. The NASDAQ/ICE proposal is what I would call an empty vessel: It looks nice, but there is nothing in there. It's full of conditionalities and it is non-executionable. And as a board, do you want to run the risk of standing there with empty hands? Also the offer doesn't really protect the NYSE Euronext shareholders because its reversed breakup fee is far and far too small compared to the huge risks that we see in execution. So should you have to choose between a very good chance of real value and a very, very small chance of value, then I think the decision is very simple. And I think we have met our fiduciary obligations. There is a lady sitting there who wanted to ask a question. And then, we'll be back to you, sir.

Unknown Speaker

Mindy Wiseman. I have 1000 shares. The board right now is about 50% European and 50% American. With the merger with the DAX kind of going 60/40, that's going to dilute the American governance to about 25%. I don't find that acceptable. Then there were 2 other questions or comments that I want, do you mind? There's been a cutback of proprietary trading in the United States. I wanted to know whether you think that will be made up anywhere if the major banks have to cut back their share. If boutique houses will start popping out that will make up for that? And I'd also like to know if we can get a report on how things are going in Lisbon.

Jan Hessels

All right, Duncan will handle the last 2 ones. Let me address your question as to the board. The only hard news is still, so far, that Duncan will be CEO, and Mr. Francioni, the current CEO of Deutsche Boerse, will act as Chairman. And we're very happy with that combination. We feel it's a very strong combination to deliver the values. For the rest, it's a total board of 17 people: 10 nominated by our German friends and 7 by New York Stock Exchange Euronext. Don't forget that, on the Deutsche Boerse side, they already have a quite an international board. I think they have 2 or 3 Americans and a few other nationalities there, and indeed, I sympathize with you if the outcome of all this would be that there would be 3 Americans on the board. I think that would not be a wise way to proceed. And before the meeting of July 7, a special shareholders meeting, we will come with more news on the future composition of the board. And also the European regulators have a certain say in this because the question is, do they want the local markets to be represented at the top board or at the lower level? That's still a point of discussion, but your point is a good one that we are very sensitive to.

Duncan Niederauer

And I think we have to remember, as we try to run a truly global company, we already have board members from 6 or 7 seven countries now, and in the new co structure, will be probably 8 or 9 countries. I don't think there will be a predominance of Americans or Germans. In fact, I would argue that we'll probably have at least one member from, by my count, 8 different countries, at least. And I actually think if you're running a global company and we're going to operate the markets where we operate them, I think, to me, that's not something we should be afraid of. It's something we should actually be embracing. To the second part of your question, you're right, where it's been most visible in the drop off in proprietary trading has really been in the U.S. equities business, right? I think a lot of that volume that was fueling that 9 billion, 10 billion, 11 billion share days in the U.S., a lot of it has dissipated. Now part of that is, in the lower volatility environment, it's a little less interesting. I think there's been a little contraction in volume post-flash crash. I think the retail customer has come back but not the way they did. I do agree with you that you'll see more boutiques picking up, but I don't know that those boutiques are going to necessarily -- they're not going to be more focused on hands-on execution for customers, not really generating a lot of proprietary activity. And a lot of the large electronic market-making customers that we deal with now as customers, what we're seeing them do is expand into other geographies and other asset classes because their technology allows them to do that. And I think they're just finding, on a relative basis, the U.S. equity market less attractive relative to some of those opportunities. So that does explain, actually, the decrease in the U.S. equity volume, but it explains some of the increase that you're seeing in some of the other markets around the world. And forgive me, but I missed the third part of your question. What's happening in Lisbon?

Unknown Speaker

[indiscernible]

Jan Hessels

The economic problems...

Duncan Niederauer

Right. So, well, we have a couple of choices in the room, but I'm going to be putting people on the spot. So you're asking, what's been happening in Portugal with the sovereign debt crisis, et cetera, et cetera? How is everybody handling it? We have Luis and we have Ricardo, so would we like to put someone on the spot to...

Jan Hessels

I think, Ricardo. I think that's...

Duncan Niederauer

We're going right to the source. We're going right to the cold face. Ricardo, you have the floor.

Jan Hessels

Mr. Salgado, of course, is our colleague on the board. He is Portuguese. He is head of one of the largest Portuguese banks.

Ricardo Salgado

Well, as you all know, Portugal followed Greece and Ireland. And then the Portuguese governments applied for the package, the European package, which is supported by the European Union and by the IMF, too. So we will have elections. The government is on a day care management. And we will have elections in the 5th of June. But so far, I know the agreement with the European package will be signed the 15th of May. So there is, I believe, common grounds among the Portuguese main parties, and they should sign -- the majority of the Portuguese Parliament should sign this agreement the 15th of May. And probably, the Portuguese President of the Republic will have to sign, too, to give a full comfort for the European program to act immediately. So the banks, they have been already involved in contacts, the discussions with what we call the Troika, the 3 intervention groups there. And on the other hand, what I can tell you is that, in the first quarter of this year, the Portuguese deficits went down 60% already. So the measures, they have been made already, they are in full force. And we are moving on the right track now, I believe.

Jan Hessels

Thank you, Ricardo. The opening bell has rung, and normally we end at this time, but we will not end, don't worry. May I suggest that we take 2 more questions, and the first one will be from the gentleman here in the middle. And then we go to you.

Unknown Speaker

Good morning. I'm Jim Carty, owning 290,097 shares. I also would like to see the ratio increase from 0.47 to 0.50. But to kind of make it more pallative on the other side, perhaps a $2 billion payment special dividend to the DB shareholders, or whatever number it would take to make that fly, may make it work. Your thoughts on that?

Duncan Niederauer

So what you're saying is, change the ratio but also do a one-sided dividend for them?

Unknown Speaker

Right, yes.

Duncan Niederauer

I think we realize that, between now and July 7, we've got the financial flexibility to consider all kinds of options. So I think these kinds of suggestions are very helpful to us. We think we've got a deal that is worth following through on. We think it presents huge value creation opportunities. And what we have to work with our partners on the DB side to discuss is, are there ways we can deploy that flexibility? So I think that's a very interesting suggestion, and frankly, one I have not thought of. But I think it's a good suggestion, thank you.

Unknown Speaker

Good morning. My name is Steve Solomon. I and my wife own north of 20,000 shares, and I have some friends who own more shares than I own. And just a comment, I guess -- you're going to be waiting until July 7, I think the game's going to be probably over by then. But in any regards, the game will be over by then, but in any regards, what I own now is shares in an American corporation headquartered in United States, trading in dollars. As I understand the deal you put together, you’re going to incorporate a new corporation in the Netherlands, be headquartered in the Netherlands -- and my concern is, it goes to the indexes. The rules of the S&P 500, the S&P 100 and, I guess, a lot of the other indexes don't permit to be included in them the shares of foreign corporations or they don't trade ADRs, if I wind up with an ADR at the end of this whole deal. So my concern is, have you spoken to the indexers to make sure that this foreign corporation will be included in the indexes? Or are the indexers going to dump all their shares once you incorporate in the Netherlands?

Duncan Niederauer

A couple of observations on that. You're correct, the incorporated entity will be in the Netherlands, but it's not headquartered there. We're a dually headquartered company now. Our headquarters are in New York and Paris, and we'll be a dually headquartered company in New York and Frankfurt. That's really all the changes. And I think we have had discussions with the indexers both here and in Europe because our partners in NDB are also in the European indices, in the DAX in particular. So you can safely assume we're having all those conversations. We know that's a potential issue and whether it ends up being a global share or something else -- but we've already had conversations with the indexers, and you should also know we're also having conversations with the analysts because a big part of it in our view is where the stock is covered from, right? And we think, if the stock is covered from the U.S. like a lot of other U.S.-headquartered companies are, even though they have very global businesses, we think that's a point, as well. So all those conversations are in play. We'll give as much transparency as we can. Those of you who have dealt with the index fund managers like in S&P -- I think we're trying to get as much clarity from them on what would be required to stay in the indices as possible. But it's not always scientific, it's a little bit of art, too. These are all good suggestions, and we're working actively with all the parties on that.

Unknown Speaker

Will we know the answer to that question, whether you'll still be in the index, before we vote?

Duncan Niederauer

Yes, I think we'd like to. It may not be entirely in our control because I don't know if they will give us a black-and-white answer before then. But I promise you, we'll give you all the facts. Whatever we have, you'll know, and if we realize that there's other things we have to do, if it looks like it will come out of the index -- we've had other people approach us that say, if that happens, that would be an interesting entry point for them. So, well, we can see how that all goes. Let that play itself out over the next couple of months, and we'll keep everybody posted.

Jan Hessels

Just to add one small point to this. As Duncan mentioned, not only dually headquartered but also the shares will be traded in Frankfurt and in New York, of course, and in Paris. And the shareholders will have the option to receive their dividends in dollars or in Euro.

Duncan Niederauer

Just as we did today.

Jan Hessels

Mrs. Davis, let's end on an uptick.

Unknown Speaker

Mrs. Davis, remember I have had 4 husbands and 5 cars, my car is now in the Ford museum in Detroit. [indiscernible]. Now mark my words, and remember, I want the press to take notice here too of this, where you heard it first. If this deal goes through, the next deal that you'd be hearing of, the Deutsche Bank will make an offer from one of our biggest banks. That's exactly what's going to happen. Remember where you heard it from first. And if you are in Amsterdam go by the [indiscernible].

Jan Hessels

Thank you for your comments. Thank you, all, for being here, and we'll be in touch.

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