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Some shareholders of NYSE Euronext are losing enthusiasm for the planned tie-up with Deutsche Börse AG, in another sign that prospects for the deal have dimmed amid protracted negotiations with European antitrust regulators.

The exchange groups have twice agreed to slice off pieces of their businesses in response to concerns from European Union antitrust authorities, but it isn't clear whether that will be enough to win their approval. Meanwhile, market turmoil tied to the European sovereign-debt crisis as well a possible tax on some trading have tarnished the appeal of the $17 billion combination for some investors, leaving them feeling increasingly agnostic on whether the deal goes through.

[NYSE]

"The smoke signals are reasonably obvious at this point that this deal will not happen," said Brian Barish, president and chief investment officer of Cambiar Investors LLC, who has supported the tie-up. Cambiar is the 10th-largest holder of NYSE Euronext shares with a 1.6% stake as of Sept. 30.

Mr. Barish earlier this year put the odds of a deal happening at 50%. Now, he said, he pegs it at 15%. Mr. Barish said his firm is comfortable with the NYSE's ability to manage its business on a stand-alone basis. If regulators demand significant, further concessions, he said, "I think you just have to walk away."

Shareholders of both companies approved the merger in July. Still, current investor views could weigh on management's thinking in negotiations over any demands for further concessions from EU competition authorities ahead of a vote by regulators seen by Feb. 9.

A spokesman for NYSE Euronext declined to comment, as did a Deutsche Börse spokeswoman.

Since the deal with the German exchange operator was announced, NYSE Euronext Chief Executive Duncan Niederauer has called the deal opportunistic and has said that his firm is on track to expand regardless.

The deal is among the last standing in a raft of abortive exchange mergers launched this year. Failure also would cross another deal off the year's list of big M&A tie-ups. This past week, AT&T Inc. nixed its deal for T-Mobile USA amid U.S. antitrust opposition.

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European Pressphoto Agency

The floor of the New York Stock Exchange

Deutsche Börse and NYSE Euronext struck their agreement in February, angling to form the largest global platform for share listings and futures trading. Terms of the deal gave Deutsche Börse shareholders 60% ownership in the combined company, due to the Frankfurt firm's higher value, with NYSE Euronext investors owning the rest.

The antitrust review in the EU has centered on the exchanges' combined dominance in continental derivatives trading; it was expected to have been completed in December and has now extended into next year.

So far, exchange executives have agreed to hive off contracts that overlap, refrain from lifting some trading fees, and grant rivals access to Deutsche Börse's clearinghouse. Neither company is willing to spin off its futures exchange in whole, though it isn't clear whether EU officials have pushed for this step.

Analysts at Raymond James and BMO Capital Markets in recent days have seen an increasing likelihood that the exchange deal doesn't get done amid the pushback from EU regulators. Some investors have suggested that NYSE Euronext would be stronger on its own, according to a research note by UBS.

Kenneth Steiner, a private investor in NYSE Euronext, said the agreed-upon concessions already have undermined the strategic benefits of the merger.

"There was a strategic rationale for it at some point, but I don't see it today," said Mr. Steiner, who had previously argued to management that the deal would be a good move if Deutsche Börse would pay a higher premium for NYSE Euronext shares.

"It's best now to take a break, get out of this deal and run the company as an independent company," Mr. Steiner said.

NYSE shares closed at $26.38 on Friday and are down 12% in a year when the Dow Jones Industrial Average has risen about 6%. Shares of Deutsche Börse were €41.80 Friday and are down 21% year to date.

Beyond the uncertainty over the EU antitrust review, the added exposure to Europe—where Deutsche Börse does most of its business—is also seen as a growing headwind among NYSE shareholders. Financial markets continue to fear that cash-strapped European nations won't be able to pay down their debt, which NYSE shareholders say could put pressure on banks and other firms that would do business at the as-yet-unnamed exchange group.

Separately, Paris and Berlin continue to back a tax on financial transactions that would hit exchanges' most-active traders.

"There's a danger, if you get too focused on doing a deal, that you can miss warning flags going up all over the place," said Thomas Caldwell, chairman of Caldwell Financial Ltd., which owns more than two million NYSE Euronext shares on behalf of investors. "There's a point at which a deal ceases to be a great deal.…My sense is they're getting pretty close to that line."

—Kevin Kingsbury contributed to this article.

Write to Jacob Bunge at jacob.bunge@dowjones.com

Printed in The Wall Street Journal, page B1

NYSE Euronext, Deutsche BГ¶rse, Deutsche BГ¶rse, NYSE, NYSE, Brian Barish

Online.wsj.com

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