NYSE & Archipelago Announce Merger Plans

Here's a snippet from a press release issued today:

"NYSE Group, Inc. Will Become a Publicly Held Company

• Better serves investors and all customers
  
  
• Supports growth and competitive position of the Exchange and U.S. in the increasingly challenging global financial marketplace
  
  
• Creates a diverse platform for the trading of listed and over-the-counter equities, options and other derivative products including ETF's
  
  
• Produces efficiencies, drives innovation, and creates new business and revenue opportunities
  
  
• Enables public to own shares in the world's leading securities market
  

The New York Stock Exchange (NYSE) and the Archipelago Exchange (ArcaEx), with approval of their boards of directors, today announced that they have entered a definitive merger agreement that will lead to the combined entity, NYSE Group, Inc., becoming a publicly-held company. If approved by regulators, NYSE members and Archipelago shareholders, the merger will represent the largest-ever among securities exchanges and combine the world's leading equities market with the most successful totally open, fully electronic exchange, creating long-term shareholder value.

'This combination will be good for investors and for America. It will create a strong, dynamic and innovative enterprise capable of meeting the demands of investors and issuers throughout the world in the decades ahead,' said John A. Thain, CEO of the NYSE. 'As we look to the future and to the challenge of competing globally in a high-speed electronically connected world, it is clear that we must do more. This transaction will mean we will be more diversified and transparent, and better able to compete, grow and serve our customers.

'It will also enhance the depth and resilience of America's capital marketplace by bringing together the strength of NYSE's auction market and the speed and entrepreneurialism of Archipelago. Today, publicly held exchanges such as those in London, Frankfurt, Toronto and Sydney are aggressively competing to expand their reach and share of market in the new global arena. On behalf of the NYSE board of directors, board of executives and my colleagues, we look forward to working with the Archipelago team to strengthen our position as a world-class competitor and to provide the highest levels of market quality and service to our customers.'

'We are thrilled to join forces with the New York Stock Exchange to create a truly world-class securities marketplace,' said Jerry Putnam, CEO of Archipelago. 'This combination benefits investors by providing a stronger and broader platform for trading and strengthens our abilities to expand into new products and services. It will also benefit the U.S. capital markets, as NYSE Group, Inc. becomes a leading player in global markets. And we believe this merger creates Archipelago shareholder value through expense synergies and revenue growth opportunities.'

Agreement Terms and Structure

The transaction is subject to approval by members of the NYSE and shareholders of Archipelago as well as certain government approvals, including the Securities and Exchange Commission and the expiration of the applicable Hart-Scott-Rodino waiting period. If approved, the NYSE and Archipelago will become part of a group under a newly formed for-profit and publicly traded holding company, NYSE Group, Inc. The NYSE and Archipelago will be combined in a "stock for membership" merger, in which NYSE members will receive consideration in the form of cash and stock in the new company while Archipelago shareholders will receive stock. Current shareholders of Archipelago will hold 30 percent of the shares of the NYSE Group, Inc., and current NYSE owners will hold 70 percent. The merger is expected to close in either the fourth quarter of 2005 or the first quarter of 2006.

Three independent Archipelago directors will join the existing 11 independent New York Stock Exchange directors as directors of the NYSE Group, Inc. The NYSE's John Thain will become Chief Executive Officer of the NYSE Group, Inc. Archipelago CEO Jerry Putnam will join the NYSE's Catherine R. Kinney and Robert G. Britz as NYSE Group, Inc. Co-Presidents. Amy Butte, NYSE CFO, will be Executive Vice President of Strategy and Product Development. Archipelago CFO Nelson Chai will be the CFO and Archipelago General Counsel Kevin O'Hara will be the Co-General Counsel of the NYSE Group, Inc.

Upon close of this transaction, regulation of NYSE Group, Inc. will be conducted by a separate non-public, not-for-profit entity governed by the Chief Regulatory Officer and a board made up of the independent directors. The non- profit SRO board will consist of independent members of the board of the holding company and will include unaffiliated directors. NYSE Regulation will fund its operation from dedicated regulatory fees and long-term regulatory service contracts. This structure will ensure that NYSE Regulation is independent yet has the proximity to the marketplace necessary to provide effective investor protection and safeguard market integrity.

Goldman Sachs & Co. acted as financial advisor to Archipelago and the NYSE. Greenhill and Co. provided a fairness opinion to Archipelago, Lazard Freres & Co. LLC provided a fairness opinion to the NYSE."

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