Deutsche Boerse shareholders back merger

Restructuring puts squeeze on profits

FRANKFURT, July 27, (AFP): The Frankfurt stock exchange Deutsche Boerse on Tuesday said its shareholders had backed a planned merger with the London Stock Exchange (LSE) to create a new global player.

Earlier this month Deutsche Boerse lowered the threshold for shareholder support needed for the tie-up to 60 percent from 75 percent, removing a potential spanner in the works for the deal following Britain’s vote to leave the European Union.

The 60-percent level was breached several hours before the midnight deadline, Deutsche Boerse said in a statement.

At 1500 GMT, the plan had garnered 60.35 percent of the capital, according to provisional figures.

LSE shareholders already voted overwhelmingly for the tie-up this month.

Under the agreed terms, Deutsche Boerse shareholders will end up with 54.4 percent of the new holding company’s capital, and LSE shareholders with 45.6 percent.

A possible headache for the two companies’ merger plans is the British decision on June 23 to quit the European Union.

Already, media reports have suggested that the headquarters of the merged company may no longer be based in London, as originally planned.

Ultimately, the company could be based either in Frankfurt or a “neutral” city such as Amsterdam, German financial daily Handelsblatt earlier reported.

Germany’s market supervisory authority Bafin, which has only a consultative role in the affair, is not enthusiastic about having London as the future HQ given that Britain, already outside the eurozone, will soon not even be in the European Union.

Need

The two groups still need the green light from several national authorities and the European Commission.

Ahead of the Brexit referendum, the two operators had set up a committee, under Deutsche Boerse chairman Joachim Faber, tasked with drawing up recommendations to ensure the group can respond to authorities’ demands for obtaining approval.

It is the third tie-up attempt after two earlier failed bids in 2000 and 2004.

In addition to the London market, LSE also operates the Milan stock exchange and LCH Clearnet transaction clearing house.

Deutsche Boerse operates the Frankfurt exchange, as well as the Luxembourg-based clearing house Clearstream and the derivatives platform Eurex.

In addition to its previous ambitions to tie the knot with the LSE, Deutsche Boerse also tried to combine forces with NYSE Euronext in 2011, which operated the New York, Paris, Amsterdam, Brussels and Lisbon exchanges at the time.

A joined LSE and Deutsche Boerse would compete with the likes of CME and ICE in the United States and the Hong Kong stock exchange.

Meanwhile, Deutsche Bank blamed on Wednesday a weak economic environment and its complicated restructuring for a 98 percent plunge in its second quarter net profit.

Net earnings in the second quarter totalled 20 million euros ($22 million), compared with 796 million in the same period of 2015.

Deutsche’s performance fell well short of the average of 188 million euros expected by analysts surveyed by Factset.