DUTCH LIKELY TO APPROVE NYSE/EURONEXT MERGER

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SIPDIS

SIPDIS

SENSITIVE

STATE FOR EUR/UBI (RREITER)
USDOC FOR 4212/USFCS/MAC/EURA/OWE/DCALVERT
TREASURY FOR IMI/OASIA/VATUKORALA
PARIS ALSO FOR OECD
STATE PLEASE PASS FEDERAL RESERVE
USEU FOR JENNIFER UNDERWOOD

E.O. 12356: N/A
TAGS: EFIN ECON EINV ELAB NL
SUBJECT: DUTCH LIKELY TO APPROVE NYSE/EURONEXT MERGER

REF: PARIS 7892

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1. (SBU) SUMMARY. Dutch Finance Minister Gerrit Zalm is preparing
to issue a no objection certificate in February that would remove
one of the last hurdles for the NYSE/Euronext merger. His approval
will contain provisions designed to discourage U.S. regulations like
Sarbanes-Oxley from being applied to European firms listed on the
combined exchange. END SUMMARY


2. (U) In a letter sent to NYSE and Euronext prior to their
shareholders' meetings in December, Zalm indicated that he was
"minded" to formally approve the merger. Legally based in the
Netherlands, Euronext requires a license in the form of a
"declaration of no objection" from the MOF to operate. Zalm's
letter also said that this license will include further provisions
to shield European companies from U.S. regulations applying across
borders.


3. (SBU) On Tuesday, Finance Ministry officials told Emboffs that
only one major regulatory issue remained outstanding, that of U.S.
sanctions against targeted countries (administered by Treasury's
Office of Foreign Assets Control, OFAC). They expected this issue
to be settled with OFAC soon, so that Zalm can give Euronext the
required operating license in early February after the SEC completes
its official filing procedure.


4. (SBU) MOF officials went on to explain that the license will
spell out conditions that will allow the Dutch Minister of Finance
to revoke it as a last resort if future U.S. laws would apply to
European companies. The procedures in case of spillover would start
with the Dutch equivalent of the SEC asking for clarification and
become steadily more firm. The stand-by structure involving a Dutch
and a Delaware foundation (reftel) would be the second to last step
in this process. Our Finance contacts described withdrawing the
license as a "nuclear option" designed not to be used but to deter.
They said the ministry has held extensive consultations with the key
players about this, and noted that not applying Sarbanes-Oxley to
Euronext was part of the business case for the merger.

COMMENT
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5. (SBU) Negotiations to form a new coalition government started
this week, and are expected to run until early March. Until a new
government is formed, the current "caretaker" cabinet can continue
to implement policy decisions. Zalm, therefore, should be able to
approve the merger before his successor takes office.

BLAKEMAN