Handelsblatt Exclusive Prosecutors expand probe of Deutsche Börse-LSE deal

Frankfurt prosecutors are investigating whether Deutsche Börse informed investors about its merger plans with London Stock Exchange in a timely manner, Handelsblatt has learned. The move comes on top of an investigation into alleged insider trading by CEO Carsten Kengeter.
Deutsche Börse's headquarters in Eschborn, near Frankfurt.

German prosecutors have broadened their investigation of Deutsche Börse’s plan to merge with London Stock Exchange, examining whether the trading platform informed its investors early enough about the possible tie-up.

Frankfurt investigators are looking at whether Deutsche Börse issued its ad-hoc announcement, a regulatory obligation to disclose stock-sensitive information to shareholders, within the period of time required. “We are examining this,” a spokeswoman for the public prosecutor told Handelsblatt.

Last week, the Frankfurt prosecutors said they were investigating the stock dealings of Deutsche Börse’s Chief Executive Carsten Kengeter, after allegations that he took advantage of insider information when purchasing shares in his own company. Investigators raided Mr. Kengeter’s house and several company offices.

Deutsche Börse’s supervisory board Chairman Joachim Faber backed Mr. Kengeter last week, saying the prosecutor’s suspicion was “groundless.” André Szesny, commercial criminal law specialist, Heuking Kühn Lüer Wojtek

The newest investigation could further complicate Deutsche Börse’s merger plans with LSE. Now, Mr. Kengeter must not only win the support of regulators and the government for the planned merger, but must also convince the public prosecutor’s office that he and the company acted in accordance with regulations. As an exchange operator, Deutsche Börse is supposed to help its clients behave transparently when handling the 1.3 million securities traded on its platforms.

Deutsche Börse officially announced its plans to merge with London Stock Exchange on February 23, 2016. If the merger goes ahead, it would create the world’s third-largest trading house worth €25 billion, or $26.7 billion, on a par with U.S. rivals ICE and CME.

Deutsche Börse, based in Eschborn near Frankfurt, declined to comment directly on the most recent investigation regarding the timely informing of shareholders.

But it issued a statement on Tuesday saying its supervisory board had “full confidence in the Chief Executive Officer Carsten Kengeter.” The non-executive supervisory board has the power to hire and fire executives and confirm strategic direction and it made an assessment of the events in 2015.

“This assessment resulted in the joint finding that no merger negotiations with the London Stock Exchange Group have taken place in the year 2015,” the supervisory board said.

The investigation announced last week probes Mr. Kengeter's purchase of shares in Deutsche Börse worth a total of €4.5 million in three tranches in December 2015, before the mega-deal with the LSE was officially announced. The acquisitions were not kept secret – the supervisory board specifically granted Mr. Kengeter the option to take part in an executive board remuneration program known as the Co-Performance Investment Plan in September 2015.

Deutsche Börse’s supervisory board Chairman Joachim Faber made a statement supporting Mr. Kengeter last week, saying the prosecutor’s suspicion was “groundless.” Both Mr. Kengeter and the company are cooperating with investigators to clear the matter.

Separately, Deutsche Börse and London Stock Exchange said Tuesday they would formally submit the divestment of the French clearing subsidiary LCH.Clearnet SA as a remedy to the European Commission in order to address anti-trust concerns raised by the E.U. body, which needs to sign off on cross-border takeovers.

 

Michael Brächer has been a financial editor in the investment team in Frankfurt since January 2013. Gilbert Kreijger contributed to this article. To contact the author: [email protected]