Merger of Lon­don, Frank­furt bourses to counter US threat

The Pak Banker - - 6BUSINESS -

LON­DON: Deutsche Bo­erse and Lon­don Stock Ex­change Group (LSE) agreed to com­bine in a $30 bil­lion deal to cre­ate a Euro­pean trad­ing pow­er­house bet­ter able to com­pete with US ri­vals en­croach­ing on their turf. But the deal, which marks a third at­tempt to link the Frank­furt and Lon­don ex­changes, may prompt a bid­ding war af­ter New York Stock Ex­change owner In­ter­con­ti­nen­tal Ex­change said it may make an of­fer for the Bri­tish group. Nearly 16 years af­ter Deutsche Bo­erse first tried to take over LSE, the Lon­don and Frank­furt ex­changes said last month they were dis­cussing an all-share merger, which they con­firmed on Wed­nes­day would give Deutsche Bo­erse share­hold­ers 54.4 per cent and LSE share­hold­ers 45.6 per cent of a new com­pany.

In a com­bined state­ment, the ex­changes sought to sell the deal, which they de­scribed as "a pre­mium free merger of equals", to their in­vestors with the lure of po­ten­tial an­nual cost sav­ings of ?450 mil­lion ($500 mil­lion). They also promised their users - the banks and fund man­agers who pay fees to trade and com­pa­nies who pay to be listed - "sub­stan­tial ben­e­fits", al­though they gave no fig­ures. And in a clear ef­fort to win over Europe's politi­cians to the ben­e­fits of a dom­i­nant pan-Euro­pean ex­change, Deutsche Bo­erse chief ex­ec­u­tive Carsten Kengeter said it would en­able Europe to en­hance its cap­i­tal mar­kets.

This chimes with Euro­pean Union plans to es­tab­lish a 'Cap­i­tal Mar­kets Union' to bol­ster the re­gion's fi­nan­cial mar­kets to com­pete bet­ter with the United States and Asia. De­spite th­ese in­cen­tives, the deal faces ques­tions about what hap­pens if Bri­tain votes to leave the Euro­pean Union in a ref­er­en­dum in June and whether reg­u­la­tors will give the nod to the cre­ation of a huge pres­ence in de­riv­a­tives clear­ing.

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