Filed by NYSE Group, Inc.
Pursuant to Rule 425 under the Securities Act of 1933, as amended,
and deemed filed pursuant to Rule 14a-12 of the
n Securities Exchange Act of 1934, as amended
Subject Companies:
New York Stock Exchange, Inc.
Archipelago Holdings, Inc.
(Commission File No. 001-32274)
Date: September 14, 2005
On September 14, 2005, the New York Stock Exchange, Inc. issued the
following bulletin to its members:
* * *
Special Membership Bulletin
[Letterhead of John A. Thain]
Date: September 14, 2005
To: NYSE Members
From: John A. Thain
Re: Update on the NYSE-Archipelago Merger
Today we filed Amendment No. 1 to our Form S-4 to respond to the first set
of SEC comments on the proxy statement. The amended S-4 will be available on our
website at www.nyse.com and the SEC's website at www.sec.gov or you may get a
copy from Mary Yeager (212-656-2062).
In response to concerns many of you raised, we have made a number of
modifications to the original terms of the deal: we have provided a mechanism
for you to elect to receive either more cash or more stock; we have
significantly shortened the lock-up period to one, two and three years, and
reiterated our intention to hold follow-on secondary offerings as quickly as the
market permits; and we have limited the employee initial stock awards to $50
million with no stock delivered until the end of year three. These modifications
keep the fundamentals of the deal in place, while helping our Members achieve
their financial needs.
The markets continue to view the deal positively. Archipelago's stock price has
been trading around $38, implying a NYSE Group valuation of $6.1 billion and an
implied seat value of $3.4 million. Over the past several weeks a number of NYSE
seats have traded at $2.8 - $2.9 million, with one trade at $3 million, an
all-time record.
The strategy behind the deal continues to be well received:
- We become a for-profit, public company better able to compete with
U.S. and global players.
- We acquire a high-speed, low-cost platform for ETFs, options, and
fixed income products that can be traded either on our Floor, on
Archipelago's platform, or in both venues.
- We gain a significant position in the OTC equity market, and the
ability to develop a second-brand listing business to compete with
Nasdaq.
- We add entrepreneurial, innovative management talent.
These objectives would be difficult and time-consuming to accomplish in any
other way, and the strategic fit between our two companies is ideal from our
perspective.
A few Members continue to misunderstand the nature of this transaction. The deal
we are pursuing is comparable to the initial public offering of the NYSE and an
acquisition of Archipelago by the NYSE for stock. In our case, these two
transactions occur simultaneously. We are not selling the NYSE and have no
intention of doing so. You the Members will be the majority owners and control
the NYSE Group going forward.
We announced our financial results on August 15. Our net income was $13.0
million for the quarter ended June 30, 2005, compared to $5.0 million in the
year-ago quarter and $26.0 million for the first quarter of 2005. Our revenues
have been trending up for the past several quarters, with a large uptick during
the first quarter from a $19.7 million regulatory fine and other non-recurring
revenues. Expenses are down from last year, led by reduced spending in general
and administrative expenses and professional services. These results reflect our
commitment to efficiency and the success of the initial measures we are taking
to prepare ourselves to become a for-profit, publicly-traded entity.
New listings remain strong, with 101 new companies added to our list so far this
year. The 80 IPO's listed represent 97% of qualified dollars raised for a total
of $28 billion domestically, plus 100% of the qualified non-U.S. dollars raised
totaling $500 million. Among the companies scheduled to list in the coming
months are Ameriprise Financial Inc., the spinoff from American Express, and
Innovene, the British Petroleum carveout that may be one of the biggest new
offerings of the year.
Archipelago announced first half 2005 results of $16.2 million net income and
$27.1 million pre-tax income on revenues of $263.7 million. The results were
negatively impacted by $8.4 million of nonrecurring merger related costs.
Eliminating non-recurring items for both Archipelago and the NYSE (principally
the $19.7 million fine and $6.0 million of insurance reimbursement for the NYSE)
and annualizing the first half results would yield Archipelago net income of
$37.6 million and NYSE net income of $61.8 million, or a 38% and 62% relative
contribution by Archipelago and the NYSE, respectively.
Our competitors have been active over the past several weeks. The Boston Stock
Exchange will team up with Citigroup, CSFB, Fidelity, and Lehman Brothers to
launch an all-electronic equities trading market next year. Six major brokerage
firms announced in mid-August they were investing in the Philadelphia Stock
Exchange, which offers both equities and options trading. And Nasdaq announced
it would offer connectivity and routing to options exchanges in the first
quarter of 2006. These developments show the speed at which our industry is
evolving and reaffirm the underlying competitive forces we face. In addition to
our traditional competitors, we must also address internalization. The best way
to counter these threats is to complete our merger as quickly as possible while
introducing new products and services that enable us to meet customers' needs
and continuing to offer the best prices in our listed stocks.
A handful of Members are attempting to impede the prompt completion of our
merger through their lawsuits against the NYSE and its Board of Directors. One
lawsuit attempted to force the premature and selective release of certain
documents. We made sure that all Members received a very complete S-4 at the
same time and had equal access to additional information. The second lawsuit
seeks to prevent the Membership from exercising their right to vote. The lawsuit
asks the court to enjoin the transaction. We believe this lawsuit is without
merit. In order to minimize the time and expense of this litigation, we
attempted to have the lawsuit dismissed on procedural grounds. This process
required the judge to assume that all allegations made by the plaintiff, however
false or misleading, were true. The judge declined to dismiss the case, and we
believe that assuring the earliest possible vote leaves too little time to
procure an appellate reversal. Unfortunately, this means that we
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will have to go through the time and expense of additional document production,
depositions and hearings. You should be aware that the merger agreement requires
NYSE and Arca to deliver at least $350 million and $150 million, respectively,
in cash to the NYSE Group in accordance with the 70:30 ratio. Any NYSE cash
exceeding the 70:30 ratio would be available to distribute to Members in
addition to the $300,000 per seat already contemplated. We currently expect to
have excess cash, and we intend to distribute it to the Members. EVERY DOLLAR WE
SPEND ON THIS LITIGATION IS A DIRECT REDUCTION IN WHAT WE CAN PAY OUT TO YOU.
REGRETTABLY, YOUR MONEY IS BEING USED IN AN ATTEMPT TO DENY YOU THE RIGHT TO
VOTE.
We continue to make progress on other aspects of the deal. The Department of
Justice has reduced its document request for the next phase of their antitrust
review. The 19b-4 rule filing has been drafted and will be discussed with the
SEC. The tax ruling is in progress. We continue to plan for the Member meeting
and vote to occur in November with a closing of the transaction early in 2006.
Finally, you will by now have received a memorandum announcing a special
contribution of $1 million from the NYSE Foundation to the American Red Cross
for disaster relief in Louisiana, Mississippi and Alabama. In addition, the
Foundation will match contributions to the American Red Cross (up to a total of
$150,000) from employees and from Members. All Members who are interested in
contributing should send checks made out to the American Red Cross to Arthur
Cashin, c/o Stock Exchange Luncheon Club, 11 Wall Street, NY, NY 10005.
We will continue to report to you directly and through your Board of Executives
representatives on an ongoing basis. I look forward to seeing you at our October
6 Member Town Hall meeting.
cc: NYSE Chairman Marshall N. Carter
NYSE Board of Directors
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IMPORTANT ACQUISITION INFORMATION WITH RESPECT TO THE MERGER
In connection with the proposed merger of the New York Stock Exchange, Inc.
("NYSE") and Archipelago Holdings, Inc. ("Archipelago"), NYSE Group, Inc. filed
with the Securities and Exchange Commission ("SEC") a registration statement on
Form S-4 (File no: 333-126780), containing a preliminary joint proxy
statement/prospectus regarding the proposed transaction. The registration
statement has not yet become effective. The parties will file other relevant
documents concerning the proposed transaction with the SEC.
Such final documents, however, are not currently available. NYSE MEMBERS AND
ARCHIPELAGO STOCKHOLDERS ARE URGED TO READ THE FINAL JOINT PROXY STATEMENT/
PROSPECTUS REGARDINGTHE PROPOSED TRANSACTION WHEN IT BECOMES AVAILABLE, BECAUSE
IT WILL CONTAIN IMPORTANT INFORMATION. NYSE members and Archipelago stockholders
can obtain a free copy of the final joint proxy statement/ prospectus, as well
as other filings containing information about NYSE and Archipelago without
charge, at the SEC's website (http://www.sec.gov). Copies of the final joint
proxy statement/ prospectus can also be obtained, without charge, once they are
filed with the SEC, by directing a request to the Office of the Corporate
Secretary, NYSE, 11 Wall Street, New York 10005, 212-656-2061 or to Archipelago,
Attention: Investor Relations, 100 S. Wacker Drive, Suite 1800, Chicago,
Illinois 60606 or calling (888) 514-7284.
The NYSE, Archipelago and their respective directors and executive officers and
other members of management and employees may be deemed to be participants in
the solicitation of proxies from Archipelago stockholders in respect of the
proposed transaction. Information regarding Archipelago's directors and
executive officers is available in Archipelago's proxy statement for its 2005
annual meeting of stockholders, dated March 31, 2005.
Additional information regarding the interests of such potential participants
will be included in the joint proxy statement/prospectus and the other relevant
documents filed with the SEC when they become available. This document shall not
constitute an offer to sell or the solicitation of an offer to buy any
securities, nor shall there be any sale of securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such jurisdiction. No offering
of securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended.
FORWARD-LOOKING STATEMENTS
Certain statements in this document may contain forward-looking information
regarding the NYSE and Archipelago and the combined company after the completion
of the transactions that are intended to be covered by the safe harbor for
"forward-looking statements" provided by the Private Securities Litigation
Reform Act of 1995. These statements include, but are not limited to, the
benefits of the business combination transaction involving the NYSE and
Archipelago, including future financial and operating results, the new company's
plans, objectives, expectations and intentions and other statements that are not
historical facts. Such statements are based upon the current beliefs and
expectations of the NYSE's and Archipelago's management and are subject to
significant risks and uncertainties. Actual results may differ from those set
forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ from
those set forth in the forward-looking statements: the ability to obtain
governmental approvals of the transaction on the proposed terms and schedule;
the failure of the NYSE members or Archipelago shareholders to approve the
transaction; the risk that the businesses will not be integrated successfully;
the risk that the cost savings and any other synergies from the transaction may
not be fully realized or may take longer to realize than expected; disruption
from the transaction making it more difficult to maintain relationships with
customers, employees or suppliers; competition and its effect on pricing,
spending, third party relationships and revenues; social and political
conditions such as war, political unrest or terrorism; general economic
conditions and normal business uncertainty. Additional risks and factors are
identified in Archipelago's filings with the Securities Exchange Commission,
including its Report on Form 10-K for the fiscal year ending December 31, 2004
which is available on Archipelago's website at http://www.Archipelago.com, and
the registration statement on Form S-4 (File no: 333-126780) filed by NYSE
Group, Inc. with the SEC.
You should not place undue reliance on forward-looking statements, which speak
only as of the date of this document. Except for any obligation to disclose
material information under the federal securities laws, none of the NYSE,
Archipelago or the combined company after the completion of the transactions
undertake any obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date of
this document.
The NYSE, Archipelago and their respective directors and executive officers and
other members of management and employees may be deemed to be participants in
the solicitation of proxies from Archipelago stockholders in respect of the
proposed transaction. Information regarding Archipelago's directors and
executive officers is available in Archipelago's proxy statement for its 2005
annual meeting of stockholders, dated March 31, 2005. Additional information
regarding the interests of such potential participants will be included in the
joint proxy statement/prospectus and the other relevant documents filed with the
SEC when they become available.
This document shall not constitute an offer to sell or the solicitation of an
offer to buy any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933,
as amended.