5th UPDATE: NYSE Board Told To Talk To Nasdaq, ICE

NYSE Euronext's (NYX) board of directors on Thursday was told by some shareholders to open talks with suitors Nasdaq OMX Group Inc. (NDAQ) and IntercontinentalExchange Inc. (ICE), warning that an agreed deal with Deutsche Boerse AG (DBOEF, DB1.XE) undervalues their company.

Other longtime investors in the New York Stock Exchange parent, which held its annual meeting Thursday, threw their support behind the Deutsche Boerse combination, which NYSE Euronext management has for the past month heavily promoted.

"Based on everything I've heard and read, I believe this merger is grossly unfair to the shareholders," Kenneth Steiner, owner of 1,000 NYSE Euronext shares, told NYSE Euronext's board Thursday at the meeting.

The closely watched gathering arrived more than two months since NYSE Euronext announced its intention to merge with Frankfurt's Deutsche Boerse to create a $25 billion exchange behemoth, and about one month after ICE and Nasdaq launched a rival proposal to break up NYSE and make its pieces more profitable.

All NYSE Euronext directors nominated won shareholders' approval Thursday, securing about 80% of the vote by the company's early estimates; dissenting votes had been anticipated as a sign of shareholder dissatisfaction with the board's decision not to open talks with ICE and Nasdaq. Steiner said he voted his shares against the directors.

A provision for investors with more than 10% of outstanding shares to call a special meeting was passed at the Big Board's annual meeting Thursday, providing another opening for Nasdaq and ICE should they woo NYSE investors to their cause. NYSE Euronext Chief Executive Duncan Niederauer said management had spoken with "at least" the 50 biggest shareholders so far.

"It's an emotional thing, but it's also a financial thing," said Peter Haas, a retired specialist who worked 43 years at the New York Stock Exchange, and a supporter of Niederauer's plan to merge with Deutsche Boerse. "I'm with it," he said.

Most shareholders who talked to reporters said NYSE management should at least meet with Nasdaq and ICE. "Why didn't you speak to [Nasdaq OMX CEO Bob] Greifeld?" said Evelyn Davis, the veteran shareholder activist, addressing the board. "I don't know that I'd have anything to do with him, but I would have talked to him."

NYSE Euronext Chairman Jan-Michiel Hessels at the meeting again rejected the idea of talking to the new suitors, calling their unsolicited bid for his company a "tactic" designed to break up the agreed Deutsche Boerse deal, seen creating a formidable global competitor.

"The board unanimously determined this was the wrong thing to do," Hessels told shareholders. "We see no reason to meet with them."

NYSE Euronext investors are slated to vote on the Deutsche Boerse deal on July 7. Niederauer said the final merger filing would likely be submitted by mid-June, and that the company has held its first meeting with the Committee On Foreign Investment in the U.S. The deal is still seen closing by year-end, he said.

Niederauer reiterated that he was open to additional moves to improve terms of the deal to ensure support from both NYSE Euronext and Deutsche Boerse shareholders. One investor's suggestion to increase the exchange ratio for NYSE Euronext shares from 0.47% to 0.5% in the deal, alongside a special dividend payable to Deutsche Boerse shareholders, was "interesting," Niederauer said.

He said that members of the combined company's board would likely be named ahead of the July 7 vote, and saw the new entity earning an estimated $2.4 billion after taxes, coming out to about $3.67 per share.

NYSE Chairman Hessels, speaking to reporters, said there had been no discussions among the board as to whether Niederauer--slated to be CEO following the Deutsche Boerse deal--should recuse himself from discussions of the rival proposal from ICE and Nasdaq OMX.

NYSE Euronext on Thursday reported a rise in first-quarter net profit Thursday and said its integration planning for its agreed tie-up with Deutsche Boerse AG is on track.

The company also declared a cash dividend of $0.30 a share for the second quarter, matching the dividend announced for the first quarter. Net profit attributable to shareholders came to $155 million, up about 19% from $130 million a year earlier.

"It's a terrific start to the year by any measure," Niederauer said at the meeting.

-By Jacob Bunge, Dow Jones Newswires; 312 750 4117; jacob.bunge@dowjones.com

-Vladimir Guevarra and Kristina Peterson contributed to this article.

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