Langone trying to scuttle NYSE-Archipelago merger This is a one-column deck for a story. This is a one column deck for a story

NEW YORK -- The owners of the New York Stock Exchange were told byformer NYSE Director Kenneth Langone on Monday that the Big Board'sdeal to merge with Archipelago Holdings would shortchange theexchange and its seat holders, sources said.

At the meeting, Langone, the billionaire investor who wants to buythe exchange and scuttle the NYSE's deal with electronic traderArchipelago, said the merger was too generous to Archipelagoshareholders, according to two sources with knowledge of the meetingwho spoke on condition of anonymity.

Under the merger agreement, Archipelago shareholders would receive30 percent of the combined company, with NYSE seat holders -- theowners of the exchange -- receiving 70 percent. Langone said seatholders should have received a far greater ratio of shares.

In addition, Langone claimed the deal would spell the end of floor-based trading on the NYSE, and that the traders and specialists whomanage transactions would be phased out. Despite efforts by the NYSEto assure members that floor trading would be continued, seat holdersrepresenting trading and specialist firms remained nervous about theproposed merger.

Langone also questioned the involvement and interests of GoldmanSachs Group on both sides of the merger agreement, the sources said.Goldman Sachs advised both the NYSE and Archipelago in theirnegotiations. The Wall Street firm also owns 15.5 percent ofArchipelago stock and an undisclosed number of seats on the exchange.

Langone has enlisted the help of former Morgan Stanley and CSFBchief John Mack in his effort, with Mack leading a "working group" ofseat holders and representatives of Wall Street firms.

In appealing to seat holders, Langone, who served on the NYSEboard and still owns a seat on the exchange, hopes to build acoalition of disparate interests in an attempt to scuttle the merger.

There are 1,366 seats on the NYSE, and those seats representequity in the exchange as well as the right to trade stock.

Sources also said that hedge fund manager Stanley Druckenmiller isbacking Langone's bid, and that he has $200 million with which to buyup as many seats as possible to force changes to the merger. A callto Druckenmiller's office was not immediately returned Monday.

A seat sold late Thursday for $1.8 million.

Langone was ousted from the board in late 2003 in connection withthe $187.5 million pay package for former Chairman and ChiefExecutive Richard A. Grasso, and was sued alongside his friend by NewYork Attorney General Eliot Spitzer last May.

AP