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Deutsche Boerse owners back $9.7 billion NYSE merger

By Edward Taylor and Ann Saphir

FRANKFURT/CHICAGO (Reuters) - Germany's Deutsche Boerse AG looked set to pull off its $9.7 billion takeover of the New York Stock Exchange group on Thursday after its shareholders backed the deal to create the world's largest exchange operator.

Shareholders in NYSE Euronext approved the deal last week but it still faces formidable anti-trust hurdles on both sides of the Atlantic, analysts say.

It is expected to take until the end of the year before the politically-charged deal gets regulatory approval.

More than 80 percent of Deutsche Boerse shareholders tendered their stock as part of the deal, the company said in a regulatory statement on Thursday based on a preliminary count.

Final results of the tender offer are due on Friday.

Shares in NYSE Euronext were up 0.5 percent at $34.04 by 1753 GMT, while Deutsche Boerse was off 0.5 percent at 53 euros.

The deal -- packaged and sold as a merger of equals -- accelerates a wave of tie-ups in the increasingly competitive and global exchange world, where companies are banding together and pushing into derivatives to survive and grow.

Deutsche Boerse shareholders will control 60 percent of the new company and 10 of 17 board seats. Still there are suspicions in Germany that NYSE management will be in the driver's seat, in addition to concerns in the United States that the New York Stock Exchange will lose influence and independence.

The new company will combine the operator of stock exchanges in New York, Paris, Amsterdam, Brussels and Lisbon with the company that runs the Frankfurt Stock Exchange and the Eurex derivatives platform.

The merged entity will have more than $20 trillion in annual trading volume, and operations spanning the United States, Germany, France, Britain, the Netherlands, Portugal and Belgium.

"This is important for future deals," said Richard Repetto, an exchanges analyst at Sandler O'Neill in New York.

"The global exchange consolidation movement has faced some headwinds. If this deal didn't pass the shareholder test, global consolidation would have come to a screeching halt."

The deal was first announced in February amid a flurry of cross-border deal attempts by exchanges eager to cut costs and diversify in the face of fast-eroding market shares in their traditional stock-trading businesses.

Key hurdles remain in the form of the Hessian Ministry of Economics, which needs to approve the takeover, and the European Commission which needs to scrutinize the proposed combination on anti-trust grounds.

Alex Kramm, analyst for UBS in New York, said: "This is not going to get the quick go-ahead green light, it will get a real thorough review. This is an unprecedented merger proposal but we do think that this should go through with limited remedies."

Executives at the NYSE and Deutsche Boerse have said the deal will put the merged company in a strong position to do deals elsewhere, even though other ambitious deals have collapsed.

The London Stock Exchange Group Plc and Canada's TMX Group Inc headed into negotiations, as did the Singapore Exchange Ltd and Australia's ASX Ltd.

One by one, however, those and other deals collapsed, shattered by political and nationalistic resistance.

NYSE Euronext itself was the target of an unsolicited counter-bid in April from archrival Nasdaq OMX Group Inc and its commodities partner, IntercontinentalExchange Inc. The pursuers retreated in May after being rejected by the U.S. Department of Justice over antitrust concerns.

GLOBAL VIEW

In the Deutsche Boerse-NYSE Euronext combination, stakeholders and politicians on both sides of the Atlantic fear that the other party will gain the upper hand.

The exchanges have promoted the deal as a merger of equals -- in part because of a dual headquarters agreement between Frankfurt and New York.

"Bit by bit, the world capital market is thinking less and less of the American capital market," said Thomas Caldwell, Chief Executive of Toronto-based Caldwell Asset Management, which owns shares in NYSE Euronext.

The larger Frankfurt-based bourse, however, will control 10 of 17 board positions, while its shareholders will own roughly 60 percent of a yet-to-be-named Netherlands-based holding company.

Labour representatives in Frankfurt have warned, however, the deal amounts to a "reverse takeover," in which the interests of Deutsche Boerse shareholders were not given sufficient consideration.

(Additional reporting by Jonathan Spicer; Editing by Greg Mahlich)

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