The Germans swoop for the stock exchange

IT is one of the three pillars of the City of London, alongside the Bank of England and the Lloyd’s of London insurance market.

But yesterday it emerged that the 314- year old London Stock Exchange could soon be taken over by the Germans.

In response to feverish speculation, the LSE Group was forced to issue a statement confirming it is holding detailed discussions with its Frankfurt- based Deutsche Boerse.

The announcement stunned the City and prompted shares in LSE Group to soar by almost 17pc – valuing the group at £9.5bn. Shares in Deutsche Boerse rose 7pc – giving it a market value of £12bn.

The LSE Group said the ‘merger of equals’ would create a trading powerhouse, with the enlarged group able to cut costs and boost revenues. But critics warned selling the venerable institution to the Germans would be a major blow to the prestige of the City of London.

Under the terms of the potential deal, the two stock markets will merge, meaning no money will change hands. But the LSE would own 45.6pc of the merged group and Deutsche Boerse would hold a controlling stake of 54.4pc.

The combined business would have single board, made up of an equal number of directors from the two companies.

But critics last night said the Germans’ majority stake means it would still call the shots.

The LSE Group is far from an all British affair having acquired Milan-based Borsa Italia in 2007 and Seattle based Russell Investments in 2014. It is run by Frenchman Xavier Rolet, who has been widely praised for reviving the company’s fortunes. But one City veteran baulked at the idea of the London Stock Exchange falling into foreign hands.

David Buik, 71, who has spent more than half a century in the City and works for City stockbroker Panmure Gordon, urged Rolet to abandon the deal.

‘We have adopted Xavier Rolet as our very own Anglophile and he has done a great job.

‘But it would be reprehensible if London’s stock market should fall into the hands of foreigners.

‘I am all for further global penetration but would not want to be the junior partner in this merger. London is the centre and heartbeat of the financial activity. Frankfurt isn’t. Say no more.’

LSE has fought off a series of takeover attempts since the turn of the century, fending off advances from the US exchange Nasdaq, Sweden’s OM Exchange and Australia’s Macquarie Bank.

Repeated attempts by the Deutsche Boerse to get its hands on the LSE have come to nothing. The two groups agreed to merge in 2000 before a rival bid for the LSE from Sweden’s OM Exchange scuppered the deal.

A formal £1.3bn offer from Deut- sche Boerse in January 2005 was also rejected. The London Stock Exchange, which has 4,700 staff around the world, is an integral part of the City of London and the engine of the UK’s powerhouse financial services sector.

It traces its origins to a coffee house in the late 17th century, where a broker named John Casting started listing the prices of a few commodities, exchange rates and certain key provisions such as salt, coal and paper in 1698.

The first regulated stock exchange was not set up until more than a century later, in 1801.

The prospect of another British firm falling into foreign hands – following in the footsteps of Cadbury and lender TSB – is likely to be politically charged.

LSE shares closed up nearly 14pc, or 317p, to 2630p on the news.