More doubts over LSE deal
GEORGE Osborne may think there is nothing wrong with selling a 54.4pc majority in the London Stock Exchange to Frankfurt’s Deutsche Boerse, but the Chancellor’s French opposite number Michel Sapin thinks otherwise.
We know France has a much more rigorous approach to overseas takeovers than Britain having declared a decade ago that yoghurt giant Danone was part of a strategic industry.
Britain had no such worries when it allowed Dairy Crest to sell its yoghurt operations to Germany’s Muller leaving UK dairy farmers at the mercy of decision makers in Bavaria.
Nevertheless, the case that Sapin makes against the £21bn London-Frankfurt tie-up is convincing and shared by Spain and leading politicians and businesses in DB’s home state of Hesse. Sapin argues a tie-up between the biggest boerses on the continent would have consequences for ‘the real economy of France and Europe’.
If consummated the deal would leave French-based Euronext, which controls exchanges in Paris, Amsterdam, Brussels and Lisbon, so far behind that they would find it difficult to compete. In Sapin’s view the enlarged Anglo-German exchange would hold within it the ‘majority of tools’ that make our markets function effectively. In particular, DB and the LSE – through the respective Eurex and LCH Clernet clearing systems – will be dominant in the derivatives, swaps and clearing areas.
Under current plans and to quieten Ger- man opponents of the deal, the two clearing systems are to be operated separately. But with a single top company and a promise to slash the costs of the joint exchange by €6bn there must be questions as to how feasible that structure will be over the longer term.
Sapin has been in his shell in the last week or so after apologising to a woman reporter for acting ‘inappropriately.’ After the Dominique Strauss-Kahn affair one would not expect anything less of a French finance minister. But the European Commission, which has shown admirable bravery on antitrust issues, should rightly take a long look at the LSE-DB love-in. And if the regulatory delays cause the deal to be held up or permanently postponed, then so be it.
The origins of the LSE date back to the coffee houses of the 17th Century and an institution which has in the past seen off would-be boarders from New York, Sweden, Australia and DB itself is capable of standing alone. That is why LSE shares have quintupled under the leadership of Frenchman Xavier Rolet.
It is known that Rolet wants out and will leave the LSE in comfort because he will be able to cash in his fully-owned shares and exercise some of his outstanding options. That is perfectly acceptable and good luck to him if, as speculated, he has political ambitions.
Allowing shareholders and the chief executive of DB, Carsten Kengeter, to take charge of the whole caboodle is a lazy solution for LSE chairman Donald Brydon. He has an important responsibility to plan for succession irrespective of whether the merger goes cold.
Greed is good
MAYBE I have been wrong about stultified Rhineland-Westphalia capitalism.
It seems employees at Deutsche Bank were every bit as capable as Barclays at hiving off assets in the aftermath of the financial crisis, providing funding and allowing staff or former staff to make some money on the side.
At Barclays – for those who have forgotten – Bob Diamond, with the assent of his then chief executive John Varley, hived off $12bn or so off toxic mortgage assets into an offshore vehicle run by ‘ former’ Barclays employees, as part of an attempt to clean up its balance sheet for regulators.
It subsequently bought the package of securities back at a nasty loss of £532m to shareholders. The Protium incident, high- lighted as unacceptable in a letter from then Financial Conduct Authority chairman Lord Turner to Barclays, was a key factor in Bob Diamond being given the heave-ho after the intervention of former governor Lord King.
And Barclays wonders why the Bank of England keeps such a close eye on its behaviour and became heavily involved when the bank sought to dictate a blueprint for separation of retail from casino banking.
We shouldn’t be that surprised at the shenanigans being uncovered at Deutsche Bank. Bad stuff was going on everywhere. Credit Suisse’s chief executive Tidjane Thiam was blissfully unaware of the risky positions taken on by some of his traders since he took on the top job. Perhaps he was too busy making sure his generous pay package remained intact.
Sure bet
SOMEONE, it seems, became a little overexcited about the Competition and Mergers Authority green light for the £2.2bn link-up between Ladbrokes and Coral and bought up option contracts on Thursday night.
One wouldn’t expect anything else but some knowledgeable speculation ahead of deal between two firms of bookies. Now they must come up with a plan for flogging 400 shops. There is one other delicate issue for Ladbrokes. What is it proposing to do with toxic Coral boss Andy Hornby who has still to be fully exonerated by regulators over his role in the collapse of HBOS?
If it wants to be whiter than white in its governance, there can only be one answer.