Regulatory Block LSE: Deutsche Börse Merger May Fall Through

The London Stock Exchange says it cannot meet all the conditions set by the European Commission for approval, making the planned merger with Deutsche Börse unlikely to happen.
Quelle: Bloomberg
The London Stock Exchange may have to throw in the towel.

The London Stock Exchange's planned merger with Germany’s Deutsche Börse is unlikely to be approved by the European Commission, LSE said in a statement late Sunday night.

Earlier this month, the European Commission ordered the British exchange to sell its 60 percent stake in MTS, a fixed-income trading platform, to get approval for the merger. It had given the stock exchanges until Monday to come up with a plan for the sale.

The LSE said that the board decided it could not commit to the sale, warning that a disposal would harm its business. "Based on the commission's current position, LSE believes that the commission is unlikely to provide clearance for the merger," the London bourse operator said.

If the LSE deal falls through, it wouldn’t be the first time. Deutsche Börse failed in 2000 and in 2004 to merge with LSE, the second time over objections from key shareholders.

A combination of the Europe's two largest exchanges would create a global rival at par with the world's biggest based on market value, Chicago Mercantile Exchange, and U.S.-listed Intercontinental Exchange, owner of the New York Stock Exchange. Last March, ICE said it might make a counter offer for the LSE, while Bloomberg reported at the time CME was also looking whether it could challenge the Deutsche Börse-LSE deal. In the end, however, no rival bid emerged.

Deutsche Börse's shares fell 4.9 percent to €79.30, or $83.89, by 09:13 A.M. in Frankfurt. The LSE stock was down 1.8 percent at 30,68 pounds, or $38.05.

LSE's business MTS is an important platform for trading European bonds and the LSE said that any possible divestment would require the approval of several European governments. It is especially influential in Italy, and the LSE said discussions with Italian regulators had made it clear that “it is highly unlikely that a sale of MTS could be satisfactorily achieved.”

The exchanges had already agreed on a sale of part of the LSE clearing business LCH, but this new demand from the Commission took them by surprise.

Deutsche Börse and London Stock Exchange had agreed a year ago to join forces to create a major European trading house but their plans have been hit by the British vote to leave the European Union, and arguments over where the newly merged entity should be based.

Deutsche Börse confirmed the LSE’s stance and said both sides are now hoping the European Commission changes its stance on the sale.

 

Meera Selva is an editor with Handelsblatt Global. Gilbert Kreijger, an editor with Handelsblatt Global, contributed to this article. To contact: [email protected]