NEW YORK — The New York Stock Exchange agreed Tuesday to an independent financial review of its proposed $6 billion acquisition of electronic rival Archipelago Holdings Inc., settling a lawsuit brought by a group of dissident seat owners and allowing a vote on the deal to proceed.

The independent financial adviser, to be chosen by the dissidents and the NYSE, will report to the owners of the NYSE's 1,366 seats no later than five days before they will vote on the deal. A vote by seat owners and Archipelago shareholders is scheduled for Dec. 6.

In return, lead plaintiff William Higgins and his group, which represent ownership of 10 seats, agreed to drop their suit to derail the acquisition, allowing the vote to go forward. They also agreed not to disparage the agreement any longer.

Manhattan State Supreme Court Justice Charles Ramos approved the settlement, commending both sides for reaching an accord after two days of testimony in a hearing on the suit. The plaintiffs were in court seeking a postponement of the Dec. 6 votes.

While Higgins had initially pushed for a renegotiation of the entire deal, he said he was pleased with the settlement.

"We got everything we came here for," Higgins told reporters at the court. "I want people to be able to make an informed decision about this deal."

NYSE Chief Executive John Thain said in a statement he was pleased that the exchange's members would be allowed to vote as planned. "This resolution is in the best interest of our members, the future of the NYSE and America's capital markets."

Higgins and his co-plaintiffs contended that the proposed acquisition was unfair to NYSE seat holders by undervaluing the exchange. They were challenging Goldman Sachs Group Inc.'s role in the deal, charging that the investment firm had a conflict of interest by representing both sides and through its ownership of 15 percent of Archipelago's stock.

But once the settlement was reached, Higgins said he was dropping his case no matter what the outcome of the independent assessment was.

"You can't stop people from voting on a bad deal," Higgins said. He said he would wait until the independent report came out before deciding whether to vote for or against the acquisition.

Higgins had also objected to the split of equity between the two companies, with NYSE seat holders getting 70 percent of the combined company and Archipelago shareholders receiving 30 percent. Those terms apparently remain intact as part of the settlement.

This week's testimony came from those involved in the acquisition talks, including former NYSE director Herbert Allison and Goldman Sachs managing director David Schwimmer. Allison maintained the NYSE board was not unduly influenced by Goldman Sachs or Thain, a former Goldman executive, while Schwimmer defended Goldman's advisory role to both the NYSE and Archipelago in the negotiations to buy Archipelago.

The NYSE announced its purchase of Archipelago on April 20, a move that would give the NYSE a badly needed technology infusion to complement its traditional floor-trading operations. The deal would also make the not-for-profit NYSE a for-profit corporation.

View Comments

Allison testified Tuesday that the NYSE board had been intrigued by the possibilities of an Archipelago acquisition as early as October 2004, noting that the electronic rival was involved in trading not only stocks, but derivatives, exchange-traded funds and bonds as well — all increasingly popular investment vehicles that the NYSE was not involved with.

"We felt it important for the exchange to become active in the derivatives market, in part to hold on to our market share in the equity market," Allison said.

Allison argued that the NYSE-Archipelago was a "prime, near-term real opportunity" for the exchange, and discussed in detail the board's thinking and decision process. He testified that Thain had no undue influence on the board, noting that many were long-time professionals in finance and government.

In approving the settlement, Ramos said, "the parties have exercised their prerogative to remove this case from the court's jurisdiction, which I consider to be a stroke of genius."

Join the Conversation
Looking for comments?
Find comments in their new home! Click the buttons at the top or within the article to view them — or use the button below for quick access.