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
Securities Exchange Act of 1934, as amended
Subject Companies:
New York Stock Exchange, Inc.
Archipelago Holdings, Inc.
(Commission File No. 001-32274)
Date: October 17, 2005
On October 14, 2005, after the close of business, the New York Stock
Exchange, Inc. issued the following bulletin to its members:
* * *
Special Membership Bulletin
[Letterhead of John A. Thain]
FROM: John A. Thain
DATE: October 14, 2005
RE: Summary of October 6 Member Town Hall Meeting
We had a productive Member Town Hall Meeting on October 6 covering three
principal topics: a business update, the status of our Hybrid Market, and the
Archipelago transaction. As I have in the past, I will summarize the major areas
of discussion for the benefit of those who were unable to attend.
I would like to begin by reiterating the strategy behind the Archipelago deal.
First, we are becoming a public, for-profit company, a transformation which many
of you had been advocating, and one that I believe we need to undertake in order
to compete with other domestic and international exchanges. We are clearly in a
period of consolidation in the global marketplace, and we must have a public
currency if we wish to participate in that consolidation. Second, through the
acquisition of Archipelago, we are broadening our product mix and providing
opportunities for greater revenue growth. Given our existing position in our
listings, trading and market data businesses, it is unlikely that our revenues
would grow beyond that pace at which the market overall is growing. The
acquisition of Arca expands our revenue drivers to include an over-the-counter
trading business, options, an improved position in the trading of ETFs, and the
ability to develop a fixed income trading business and a second listing brand.
We also acquire an entrepreneurial, innovative management team.
The market has continued to view this strategy positively. Seats have recently
been trading at $2.8 million. With the AX stock price at $37.20, the implied
value for each seat in the merger is $3.3 million including the $300,000 cash
distribution (but not including any excess cash distribution). The implied
market value of the new NYSE Group is $6 billion.
The various regulatory filings related to the transaction are proceeding on
track. We filed Amendment #1 to the S-4 on September 14 and have received
comments back from the SEC. We have provided the complete draft of the 19b-4 to
the SEC. The IRS tax ruling and Hart-Scott-Rodino antitrust review are
proceeding. We currently hope to finalize the S-4 by the end of October and
schedule a Member meeting and vote for late November. The timing is, of course,
subject to SEC approval.
Based on meetings with institutional investors and capital market
representatives from the various broker-dealers, we believe there will be
considerable interest on the part of investors in owning shares of the NYSE
Group. We have been advised, subject to market conditions, that a successful
secondary offering of $1 billion to $2 billion could be accomplished shortly
after the closing of the deal. This would give Members significant liquidity
much sooner than the expiration of the lock-ups.
We reviewed the status of the litigation by the small group of Members seeking
to deny you the right to vote on this transaction. We were unsuccessful in our
attempt to have this litigation dismissed. Therefore, we are in the document
production and deposition process, leading to a potential hearing in
mid-November. We continue to believe that this lawsuit is without merit and will
result only in our having less excess cash to distribute to the Members. We do
not believe that you should be denied your right to vote.
We discussed my June meeting with representatives of Bain and Blackstone. No
offer was made by this group. We are not seeking capital or a minority investor.
An equity investor would not further our strategy of becoming a public company
and broadening our product mix. We are not seeking to sell the NYSE.
We were approached by a Member seeking permission to utilize a Grantor Retained
Annuity Trust ("GRAT") as an estate-planning vehicle for his seat. There is
potentially a significant benefit, given the current level of seat prices, to
utilizing a GRAT prior to the transaction closing. This would require a two-step
process: first transfer of the seat to an LLC, then transfer of the LLC
interests to a GRAT. While we will not provide tax or legal advice on this
process (you must consult your own tax and legal advisors) and our ability to
permit these transfers is subject to SEC approval, we will facilitate the
process if you wish to pursue this idea. We want to continue to be responsive to
the views and ideas of our Members. You may have your tax or legal advisors
contact Rich Bernard (212-656-2222) at the Exchange.
Development of the NYSE Hybrid Market continues on track. We have sent Amendment
#7 of the Hybrid Market filing to the SEC, and are continuing to develop and
roll out the
technology that will support it. We have heard concerns from the floor about
effectuating and reporting floor trades in the Hybrid market, and a special
subcommittee of the Technology Policy and Oversight Committee has been
established to address the issue. A new floor broker organization, the
Independent Broker Action Committee ("IBAC") has been established, in addition
to the two existing organizations, to address concerns about the auction market.
We continue to believe that the price discovery process of the auction market is
core to the value proposition of the NYSE, and that the Hybrid Market will give
specialists and brokers powerful new tools to represent their customers and
discover prices at the point of sale.
The Exchange's business continues to be strong. We have had 111 listings to
date, putting us 11% ahead of 2004. The listings include 71 operating companies,
36 closed end funds, and four ETFs. Our share of trading has trended downward
slightly, due primarily to a loss of share in high-volume, low-priced stocks and
a change in Nasdaq's rules requiring off-hours trades to be printed to the tape.
We are considering a variety of options for addressing that decrease in share.
We are on track to exceed our net income targets for the year, and have already
identified most of the $100 million in 2005-06 expense reduction we committed to
achieve.
Marsh Carter discussed the question several of you had raised about
representation of current NYSE Members on the NYSE Board of Directors. Under our
current Constitution, Members are prohibited from serving on the Board.
Post-merger, we will be subject to the SEC's and the NYSE's Board independence
requirements, which would not preclude shareholders from Board service by virtue
of their ownership of NYSE Group shares. Marsh noted there were currently two
vacancies on the NYSE Board and that Dr. Alice Rivlin, who heads the Board's
Nominating and Governance Committee, was seeking qualified candidates. If you
wish to recommend a qualified candidate to the Nominating Committee, please
direct that recommendation to Mary Yeager, Acting Corporate Secretary
(212-656-2062), who will provide it to Dr. Rivlin and her Committee.
As always, we welcome your input and appreciate your support.
IMPORTANT ACQUISITION INFORMATION WITH RESPECT TO THE MERGER
------------------------------------------------------------
In connection with the proposed merger of Archipelago and the NYSE, the
parties intend to file relevant materials with the SEC, including a joint proxy
statement/prospectus regarding the proposed transaction. Such documents,
however, are not currently available. MEMBERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION WHEN IT BECOMES
AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Members will be able
to obtain a free copy of the joint proxy statement/prospectus, as well as other
filings containing information about Archipelago and the NYSE without charge, at
the SEC's website (http://www.sec.gov) once such documents are filed with the
SEC. Copies of the joint proxy statement/prospectus can also be obtained,
without charge, once they are filed with the SEC, by directing a request to
Archipelago, Attention: Investor Relations, at 100 S. Wacker Drive, Suite 1800,
Chicago, Illinois 60606 or calling (888) 514-7284.
Archipelago, NYSE 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 Memo 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 Memo may contain forward-looking information
regarding Archipelago Holdings, the New York Stock Exchange ("NYSE") 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 Archipelago and NYSE, 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 Archipelago's and NYSE'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 Archipelago shareholders or NYSE members 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.
You should not place undue reliance on forward-looking statements, which
speak only as of the date of this Memo. Except for any obligation to disclose
material information under the Federal securities laws, none of Archipelago,
NYSE 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 Memo.