EU blocks Deutsche Börse’s $14-billion takeover of LSE

European Union regulators dealt a final blow to Deutsche Boerse AG’s planned takeover of London Stock Exchange Group Plc, a symbolic block on EU-UK integration on the same day Britain formally serves notice of its decision to quit the EU.

The $14-billion deal to create Europe’s biggest exchange would have harmed competition in the soon-to-be 27-nation EU by creating a de facto monopoly for clearing bonds and repurchase agreements, the European Commission said in an emailed statement Wednesday. The decision, flagged last month by LSE, thwarts Deutsche Boerse’s expansion just five years after the EU also banned a proposed tie-up with NYSE Euronext.

“The commission cannot allow the creation of monopolies, and that is what would have happened in this case,” Margrethe Vestager, the EU’s anti-trust commissioner, told reporters in Brussels. LSE was “not prepared” to sell a small unit that would have removed concerns that the combined firm could have weakened rival Euronext NV.

EU regulators have become increasingly tough on big deals, demanding weighty concessions to eliminate overlapping businesses amid concerns that a combined firm could dominate an industry and increase prices. While this is the second time that Vestager has formally blocked a merger, several transactions have been ditched over anti-trust opposition.

“It’s game over for the time being,” Alasdair Haynes, founder of London-based stock market operator Aquis Exchange Ltd, said of dealmaking between national European exchange companies. “What with Brexit going on, people need to see what the market is going to look like. You’re risking far too much to try and do a deal at a time of complete uncertainty.” Deutsche Boerse confirmed the deal’s collapse shortly after the decision.

When the exchange receives the formal notice, the merger agreement “will automatically terminate,” the German company said in a statement. The EU veto is “a setback for Europe” and “the bridge between continental Europe and Great Britain, Deutsche Boerse Chairman Joachim Faber said in a separate emailed statement.

LSE shares rallied as much as 3.6 per cent after announcing plans for an on-market share buyback of £200 million ($249 million), “an amount broadly equivalent to the return it would have made had the merger with Deutsche Boerse proceeded as planned.”