Deutsche Börse and the London Stock Exchange inched closer on Tuesday to merge operations and become the world’s fourth-largest bourse platform.
LSE has agreed to sell its French clearing operation LCH SA for €510 million, or $531 million, to rival Euronext hoping it will bring E.U. approval to merge with Deutsche Börse. The deal, for which talks first started in February 2016, would form an exchange group worth around €25 billion, or $26.1 billion.
The European Commission, the E.U. antitrust regulator, has stated objections to the combination of LSE and Frankfurt-based Deutsche Börse, fearing it might lead to dominant market positions. The sale of LSE’s French clearing business LCH SA could alleviate these concerns.
“The proposed sale of LCH SA would be subject to review and approval by the European Commission in connection with the recommended merger of LSEG and Deutsche Börse,” LSE said in a statement on Tuesday.
In addition to cartel concerns, Britain’s vote to leave the European Union threatens to thwart the merger and there’s a dispute raging over where the merged exchange should be based.
Deutsche Börse's shares rose as much as 1 percent and traded up 0.4 percent at €79.41 by 09:30 a.m. in Frankfurt. LSE's stock was down 0.5 percent at 29.10 pounds, or $35.74.
The transaction is also subject to Euronext shareholders' approval, the merger of LSE and Deutsche Börse and other regulatory approvals, the London-based exchange said.
Deutsche Börse CEO Carsten Kengeter told Handelsblat last month he remained confident the merger with the London Stock Exchange will receive cartel approval.
But the success of the merger is far from certain. In addition to cartel concerns, Britain’s vote to leave the European Union threatens to thwart the plan and there’s a dispute raging over where the merged exchange should be based.
LSE owns around 57 percent of LCH Group, while the clearing company’s users – banks and other exchanges – own the remainder.
LCH SA clears trades in equities, derivatives, bonds, currencies and other securities in France, the Netherlands, Belgium and Portugal. LCH Group’s British and U.S. subsidiaries are not part of the deal.
Gilbert Kreijger is an editor with Handelsblatt Global, covering companies and markets. To contact the author: [email protected]