Selling America's Corporate Legends
Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
At the end of 2012, NYSE Euronext (NYSE: NYX), the owner of The New York Stock Exchange, announced that it had agreed to be acquired by IntercontinentalExchange (NYSE: ICE) for around $8 billion. The acquirer is an upstart commodities and derivatives exchange operator that's only been around for a little more than a decade. With a history that dates back to a 1792 agreement reached under a buttonwood tree in lower Manhattan, it seems something of an inglorious turn of events -- and one that will have a bigger Main Street impact than Wall Street may believe.
A Changing Business
At one point, operating an exchange was a great business. The exchange was, essentially, the “house,” making money for just providing investors the ability to trade stocks and commodities. With technology advances, however, came other options for trading and reduced human involvement. Moreover, new markets were created, including derivatives and stock options. The exchange business very quickly became more competitive, with the last decade or so filled with transformational transactions, including The New York Stock Exchange pairing up with Euronext.
That deal came shortly after the Big Board purchased rival Archipelago to itself become a publicly traded company. The Euronext purchase, however, was one of strength, in which The New York Stock Exchange was helping to create a transatlantic exchange operator. The sale to IntercontinentalExchange seems like a faded baseball legend giving up his position to a hot-shot rookie.
To make matters worse, many of NYSE Euronext's European assets are likely to be on the chopping block if the deal goes through, effectively dismantling what The New York Stock Exchange worked to build. One can't help but see this as a setback for such an important part of the history of capitalism, and, perhaps, American capitalism itself.
Not the first to go
This isn't the first time in recent years that an American legend has sold itself. Although its hard to tell today, America's beer, Budweiser, is actually owned by Anheuser-Busch InBev (NYSE: BUD), a late 2008 combination of U.S. beer legend Anheuser-Bush and foreign beer giant InBev. While the merger may have made financial sense, to many on Main Street it looked like a storied U.S. company selling out the American dream to foreigners. While the combined company may be stronger financially, holding a massive market share across the world that Anheuser-Bush couldn't hope to achieve on its own, there are some that suggest a Bud no longer tastes that same as it once did. That could be the cost cutting that took place after the merger or, perhaps, the changed perception of an icon.
WM Wrigley was another legend that sold out in 2008 when it agreed to be acquired by privately held Mars, Incorporated. While this deal marked the end of an American legend, the fact that Mars is U.S. based helped to soften the blow. So, too, did the involvement of Warren Buffet's Berkshire Hathaway, itself something of a American icon. Still, in the end, Wrigley went from a legendary company to just another brand.
Better to merge than die
Then there is the sorry tale of Woolworth, which spawned the iconic nickname “five and dime.” The company's stores once dotted the American landscape, offering everything from food counter service to clothing. Unable to compete with newer, more modern retailers, the company simply folded up its five and dimes and changed into a shoe store.
Management's choice to focus on the company's profitable sports shoe division, to become Foot Locker, was probably the right decision financially. However the news of Woolworth's demise sent a pang of sadness through those old enough to remember the term “soda jerk.” It meant that no-frills upstarts like Wal-Mart, which seem to lack any personality in the quest for cheap, had won the day.
No one cares about history on Wall Street
Wall Street has a perception problem today. Too many people see it as a place more concerned with money than anything else. The financial shenanigans that seem to appear all too frequently, highlighted by the banking led 2007-2009 recession and the massive Madoff Ponzi scheme, have already tainted capitalism and capital markets alike. The apparent disregard for history in the pursuit of greater profits, while sound on a business sense, is also hurting the confidence of investors on Main Street.
ReubenGBrewer has no position in any stocks mentioned. The Motley Fool recommends NYSE Euronext. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!