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As of tomorrow, April 4, 2007, Euronext, Europe’s largest and technologically most advanced international stock exchange, will become part of the NYSE Group (NYSE:NYX). The gigantic new trading platform, called NYSE Euronext, is capitalized at $29 billion and interconnects trading platforms and exchanges in New York, Paris, Brussels, Amsterdam, Lisbon and London.

As the Euronext shareholders have an option to exchange each Euronext share for 95.07 Euros, the pertinent question is at what price a share this new entity is expected to trade, based on the conditions set forth in its Prospectus.

Jim Cramer has said lately that NYX, his “growth stock of the year”, should be at least up to its 52-week high of $110 a share, and even some $240 long-term.

Based on some simple calculations we offer below, Cramer is right on target, based on the price “built” into certain provisions of the new firm’s Prospectus, at least in his short-term price target assessment.

We have to assume the major shareholders of NYSE knew what they were doing creating the world’s first global exchange with the most advanced IT infrastructure and potential for round-the-clock trading of major European, global and international stocks, linking investors and companies in all of Europe, the US, and the world.

Mind you, that based on the market conditions, the “fair price” implicitly assumed in the Prospectus, and which we calculate below, may differ from the price established by the mighty and infinite wisdom of Mr. Market. As the old saying goes, markets can stay irrational far longer than you can stay solvent, which we should heed as a word of caution. No less important, perhaps not only educational, but potentially lucrative maybe an exercise in simple calculations to determine the price built into – or more accurately – assumed by the Prospectus. Let’s look at the conditions Prospectus specifies:

a) According to PROSPECTUS of NYSE EURONEXT, INC, the new company will acquire each share of Euronext for € 21.32 plus 0.98 of a share of the common stock of NYSE Euronext.

b) The notable alternative is for the Euronext shareholder to just receive € 95.07 in cash for each Euronext share.

c) These two alternatives (a) and (b) must be equivalent in value to prevent arbitrage. p> ">

d) Shareholders on NYSE (NYX) receive one share of common stock of the combined company (NYSE Euronext, Inc) for each share of NYSE.

Based on conditions (a), (b), and (c), we can write a simple equation:

€21.32 + 0.98X = €95.07

where X is the price ( in Euros ) of one share of NYSE Euronext.

Solving this equation for X, we get X = (95.07 – 21.32) / 0.98 = €75.255.

With the current Euro/USD rate being about 1.333, the “built-in” price of a share of NYSE Euronext, as assumed by its Prospectus is 75.255 * 1.333 = $100.32 USD.

At the Friday’s, Mar-30, 2007 closing of $93.75, the NYX stock is currently trading at a 7% discount to its “fair value” as implied in the Prospectus. As Cramer noted, the big boys with access to global exchanges are playing the arbitrage game, buying Euronext shares, even if pennies below €95.07, and shorting NYX. But this downward pressure on NYX is no more comes Wednesday, and the stock should trend up to its “fair price” (as implied by the Prospectus) of over $100 USD.

In addition, the deal simply telegraphs a great potential for appreciation of NYX stock, given the new firm’s global reach, the economies of scale, advanced technology and its super-wide economic mote.

For the sake of disclosure, I put my mouth where my money is and bought a few shares of NYX at $92 and change.

NYX 1-yr chart