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New Jersey pension fund sues NYSE Euronext on ICE deal

Traders work on the floor of the New York Stock Exchange in New York December 20, 2012. REUTERS/Andrew Kelly
Traders work on the floor of the New York Stock Exchange in New York December 20, 2012. REUTERS/Andrew Kelly

By Nick Brown

NEW YORK (Reuters) - A pension fund that holds shares of NYSE Euronext has sued the exchange operator over its proposed $8.2 billion sale to IntercontinentalExchange Inc , saying the deal undervalues the company's stock.

The New Jersey Carpenters Pension Fund late on Friday filed a complaint in New York State Supreme Court in Manhattan contending that NYSE Euronext breached its duty to maximize returns for shareholders. The lawsuit seeks class action status on behalf of other NYSE Euronext shareholders and aims to block the sale.

It is the second such lawsuit filed against the exchange operator since the deal was announced on Thursday. An individual shareholder, Samuel Cohen, filed a proposed class action in Delaware Chancery Court on Friday that also seeks to prevent the buyout from going forward.

Under the deal, NYSE Euronext, which operates the New York Stock Exchange, will sell itself to Atlanta-based ICE. The stock-and-cash deal is expected to close in the second half of 2013.

At $33.12 per share, ICE's offer represents a 28 percent premium to NYSE Euronext's closing price last Wednesday.

In court papers, the New Jersey pension fund said the deal was based on a "hopelessly flawed process" that would favor NYSE Euronext Chief Executive Duncan Niederauer and several members of its board of directors.

The sale was "designed to ensure the sale of NYSE Euronext to ICE on terms preferential to ICE and designed to benefit NYSE Euronext's insiders," the pension fund said.

A spokesman for NYSE Euronext declined to comment. A spokeswoman for ICE, which is also named as a defendant in the lawsuit, did not return a call seeking comment.

The lawsuit also names as defendants Niederauer, NYSE Euronext Chairman Jan-Michiel Hessels, and other executives and board members.

The buyout is expected to help ICE compete in derivatives trading against U.S.-based CME Group, owner of the Chicago Board of Trade. Derivatives trading is highly profitable for the exchanges, and new rules next year will dramatically expand the demand for clearing over-the-counter contracts.

NYSE Euronext's stock market businesses are less valuable to ICE, and the company said it will try to spin off the Euronext European stock market businesses in a public offering, generating speculation it may also have little interest in the NYSE trading floor.

Profits from stock trading have been significantly eroded by new technology and the rise of other places for investors to trade, including venues known as "dark pools."

The cases are New Jersey Carpenters Pension Fund et al. v. NYSE Euronext et al., Supreme Court of the State of New York, No. 654496/2012, and Cohen v. NYSE Euronext et al, Delaware Court of Chancery, No. 8136.

(Reporting By Nick Brown; Editing by Martha Graybow, Andrew Hay, Bob Burgdorfer and Steve Orlofsky)

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