Deutsche Boerse to sell ISE options exchange to Nasdaq

Deutsche Boerse is selling U.S. options exchange operator International Securities Exchange for $1.1 billion to Nasdaq, potentially strengthening its hand in a proposed merger with London Stock Exchange. Deutsche Boerse said late on Wednesday that it was set to book a disposal gain in the high triple-digit millions of euros from selling ISE, having written it down continuously since acquiring it for $2.8 billion in 2007.

The German exchange's shareholders could benefit through an extra dividend or share buyback, analysts at brokerage Equinet said, adding that Deutsche Boerse would have additional cash to increase its LSE offer in the event of a takeover battle for the British company.

Intercontinental Exchange (ICE.N) said this month that it might make a rival offer for LSE. People familiar with the merger talks between Deutsche Boerse and its European peer cautioned that money is not the only consideration in that deal.

While an enhanced offer may help to win over shareholders, such a step may make it harder to secure political backing in London because it would change the character of the deal from a merger of equals to a takeover by Deutsche Boerse, they said. Deutsche Boerse Chief Executive Carsten Kengeter has said he has alternatives if the LSE merger does not go through, adding that it is unclear whether counter-bidders really want to buy LSE or want to weaken competitors by forcing them to pay more.

ISE operates three electronic options exchanges, which together account for more than 15 percent of U.S. volumes, while Nasdaq operates another three. Combined, Nasdaq would command more than 40 percent of the market, extending its lead as the No.1 U.S. options exchange operator.