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A Manhattan judge has approved an unusual settlement that will clear the way for a vote today on the merger of the New York Stock Exchange with Archipelago Holdings Inc., a competing electronic exchange. The combination, which is expected to be approved by NYSE seatholders, will convert the world’s largest stock market from a nonprofit entity into a public corporation. But several dissenting seatholders had objected, charging that the deal overvalues Archipelago, whose shareholders will receive 30 percent of the new entity’s shares. Led by seatholder William Higgins, the dissenting group sued the NYSE, its directors and its financial advisor, Goldman Sachs, to enjoin the merger on the grounds that Goldman was conflicted by its ownership of 15 percent of Archipelago. The group also claimed NYSE chairman John Thain, a former president of Goldman, was conflicted by his ownership of a large bloc of shares in the investment bank. The plaintiffs also questioned a fairness opinion on the deal issued by another investment bank, Lazard Freres, whose initial public offering had been overseen by Goldman. The parties reached a settlement on Nov. 14 requiring the issuance of a new fairness opinion, this time by Citigroup, to be distributed to seatholders. After Citigroup also approved the deal, the plaintiffs objected and cited a report they commissioned by Willamette Management Associates showing the defendants failed to properly value the two exchanges. Last week, the defendants agreed to distribute the Willamette report to all seatholders in return for adhering to a Dec. 6 date for the vote. In Monday’s ruling denying some seatholders’ request for further delay, Manhattan Supreme Court Justice Charles Ramos praised the compromise, noting that it was “problematic” to him that fairness opinions were invariably positive. “Fairness opinions have become watered down and toothless,” he wrote in In Re NYSE/Archipelago Merger Litigation, 601646/05. “While financial experts are not expected to repeat their own due diligence, some analysis of the validity of management’s assumptions would be a breath of fresh air.” Ramos said the combination of the positive Citigroup report and the negative Willamette report provided a “fair and balanced view of the proposed merger and present the NYSE Seatholders with an opportunity to exercise their own business judgment with eyes wide open.”

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