The London Stock Exchange (LSE) Group and Deutsche Börse have confirmed a merger of the two groups, a tie-up between two of the largest exchange companies in the world.
In an initial statement, the LSE had said the potential merger “of equals” remains conditional on agreement of other terms and final approval by the boards. However, the merger is now confirmed. Under the terms of the deal, LSE shareholders will own 45.6 per cent of the new holding company, while Deutsche Börse will own 54.4 per cent. The merger will continue to hold its headquarters in London and Frankfurt.
The merger will provide an opportunity for both companies to “strengthen each other in an industry-defining combination”, creating a European based global markets infrastructure group, the statement said.
This is the third attempt on the part of both exchanges to merge in 16 years. During the bidding process, Intercontinental Exchange (Ice), the owner of the New York Stock Exchange, also announced it was considering a potential counterbid.
Earlier this week, Michael Hewson, chief market analyst at spread betting platform CMC said he did not think the merger was a good idea, “The Ice option makes better sense because it still preserves the two dual exchange model of London clearing house and Eurex.”
Mr Hewson further argued that merging with a European Börse would mean a loss of competition and bring the risk of a monopolistic behaviour in the EU.
He also warned the merger may not be ideal looking at the risk of a UK exit from the EU, “It does play into the Brexit debate and politics. Ultimately whether we get a Brexit is neither here nor there. For me the risk is over the longer term, the business will leak away from London into central Europe because European regulators are going to be very reluctant to allow euro-denominated transactions to take place outside the euro area,” Mr Hewson added.
The LSE recently reported a 31 per cent rise in adjusted pre-tax profits to £643m, as revenues soared by 78 per cent to £2.3bn.
The Chart shows the performance of LSE over the past one-year.
