ICE would keep London Stock Exchange if it bought LSE Group
Intercontinental Exchange Inc. has decided it would keep London Stock Exchange Group Plc's namesake equity market if it successfully buys the parent company, according to people familiar with the matter, a reversal of strategy from the last time ICE purchased a European stock exchange.
Though its corporate name implies otherwise, London Stock Exchange Group runs a constellation of businesses that go far beyond trading stocks. The jewels of the operation are probably a majority stake in LCH.Clearnet Group's swaps clearinghouse and the FTSE Russell index compiler. By retaining the London Stock Exchange, Atlanta-based ICE would own two iconic equity platforms with roots going back centuries -- the other being the New York Stock Exchange. ICE views the LSE as a valuable global brand alongside the NYSE. Retaining it could help emphasize to U.K. regulators tasked with approving any deal that it views London as central to its business, according to the people, who asked not to be identified because talks are private.
Markets like the LSE and NYSE are perceived as emblems of a nation's economic prowess. Companies have a duty to find the best deal for their shareholders, but regulators sometimes let national interests influence their approval of takeovers. Even though competition has made them less lucrative, stock exchanges are important to their home economies because companies rely on them to raise capital.
That's why perception, even before a formal offer is presented, matters.
ICE is waiting for a deal between Frankfurt-based Deutsche Boerse AG and LSE to emerge before potentially making its own higher offer, said the people familiar with the discussions. The German and U.K. exchange companies may announce a deal as soon as next week, the people said.
Officials for ICE, Deutsche Boerse and LSE declined to comment.
Capital markets, which include equity trading on the London Stock Exchange, accounted for less than a quarter of the parent company's income last year. LCH and FTSE Russell are viewed by analysts as faster growing businesses. But stock exchanges carry iconic value that can outstrip their tangible financial worth.
Take the Chicago Stock Exchange, for instance. It's practically an afterthought in the U.S. equity market, amounting to about 0.5 percent of the nation's trading. However, news that a Chinese-led group agreed to buy it provoked uproar a few weeks ago, with politicians calling for a national-security review of the deal.