Analysts and stock exchange sources have slammed the proposed three-way merger between Euronext and the cash equity markets in Germany and Italy, describing it as over-ambitious and unworkable.

The idea emerged this month in a report published by the French lobby group Paris Europlace, which called for a European solution to exchange consolidation. The report, overseen by Henri Lachmann, president of French electronics company Schneider, said Euronext should acquire the cash equity businesses of Deutsche Börse and Borsa Italiana before its proposed $10.2bn (€7.9bn) merger with the New York Stock Exchange. In turn, shareholders in the German and Italian exchanges would own 20% of the enlarged group. Last week Euronext, run by chief executive Jean-François Théodore, publicly supported the idea but only after it had completed its merger with the US exchange. It reiterated its position at the weekend after it emerged that Deutsche Börse had unilaterally asked the European Commission to approve its €9.8bn ($12.2bn) bid for Euronext. In a statement on Sunday, Euronext and the NYSE said they noted Deutsche Börse's "outright rejection of Mr. Lachmann's suggestion, accepted by Euronext and NYSE, that there be a merger of cash businesses in Europe on the basis of the federal model initiated by Euronext." If such a deal were concluded, it would create a European stock exchange of six national markets with a combined €4.5 trillion of listed companies. This would eclipse the London Stock Exchange for the first time as the largest exchange in Europe with €2.7 trillion in domestic listed companies. However, exchange analysts have heaped scorn on the idea. An analyst at a US investment bank said: "This is so unlikely to happen. It is a ridiculous report. It should have recommended a full merger with Deutsche Börse." Elie Darwish, an analyst at broker Exane, said the cash equity business of Deutsche Börse could be worth €2bn, assuming it represented 15% of profits at the German exchange. However, he said: "This is unlikely to happen. It is an excellent solution for members and users of the exchange but not for shareholders." Another analyst said: "You have to ask yourself, ‘is that feasible?' And the answer is probably no. Why would Deutsche Börse want to strip out one of its best assets and give it to a competitor?"