LSE-Börse deal Hundreds of Jobs to Go in Exchange Merger

The Deutsche Börse and London Stock Exchange’s $30-billion merger plan will result in up to 1,250 job losses. But the German stock exchange’s chief says he wants to avoid forced layoffs during the creation of the world’s third-largest trading platform.
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Carsten Kengeter, Deutsche Börse’s CEO. Picture

The merger of Deutsche Börse and London Stock Exchange Group, which will create the world's third-largest trading platform, will lead to the loss of up to 1,250 jobs, or 12 percent of the total, the two companies said in a joint statement Wednesday.

Deutsche Börse’s chief executive Carsten Kengeter, who will head the merged company, told Handelsblatt the new stock exchange group aimed to cut staffing “without forced redundancies.”

“It is very important to us that this cutback happens in a socially acceptable manner,” Mr. Kengeter said in an interview.

The owners of the stock exchanges in London and Frankfurt announced the merger in February and, if successful, will create a stock and derivatives trading platform valued at €27.4 billion, or $30.7 billion. That's the largest in the world after Atlanta-based Intercontinental Exchange and the Chicago's CME.

The announcement suggests they do mean business, but it could look impetuous if the European Commission objects. John Colley, Professor, Warwick Business School

The merger is still subject to regulatory approval, something that some analysts have seen as a possible hurdle to the deal. The new group, which jointly employed 10,528 people at the end of 2015, will be headquartered in London, a decision Mr. Kengeter insists will not be affected by the outcome of the British E.U. referendum on June 23.

But he said that employees shouldn’t expect any more cuts on top of those announced. “The numbers in the merger plan are fixed,” the executive said, adding that the point of the merger was to achieve growth, and not restructuring.

Combining the two companies was expected to create 200 new jobs thanks to expected growth opportunities and enable the shift of 350 jobs to “nearshore and offshore locations,” the two stock exchanges said.

“This would result in around 700 reduced positions mathematically speaking, which would be split evenly among the two firms and several locations,” Mr. Kengeter said.

 

02 p27 Merging Frankfurt and London's Stock Exchanges-01 deutsche börse london stock exchange lse boerse

 

The 49-year-old, a former UBS and Goldman Sachs investment banker, is keen on the new company achieving the number 1 or 2 position in the markets it operates in and in March warned of the risk of becoming smaller compared with other rivals.

“The announcement suggests they do mean business, but it could look impetuous if the European Commission objects to the tie-up,” John Colley, a professor at Warwick Business School in Britain, said in a statement. “This remains a possibility as there are plenty of competition concerns and, indeed, political sensitivities to the 'merger of equals'.”

Mr. Colley said that merging the companies’ two clearing houses, LCH.Clearnet and Eurex, would be an issue and the European Commission, which must approve pan-European takeovers, would likely demand assurances to keep the clearing houses separate.

Deutsche Börse and the London Stock Exchange expect cost synergies of around €450 million annually, to be achieved three years after completion of the merger, a figure the companies had already announced in March. It also expects €250 million in “revenue synergies,” for instance by cross-selling products.

London Stock Exchange’s shareholders will vote on the merger on July 4, while the owners of Deutsche Börse’s shares will have until July 12 to tender their shares. If financial regulators and antitrust authorities approve the merger, it could be completed in the first quarter of next year, the two companies said.

 

Michael Brächer is a financial editor in the investment team in Frankfurt. Daniel Schäfer is head of Handelsblatt's finance pages and based in Frankfurt. Christopher Cermak and Gilbert Kreijger, editors with Handelsblatt Global Edition, contributed tho this article. To contact the authors: [email protected] and [email protected]