Five hurdles that can still scupper the LSE merger

... and stop its French boss walking away with £13m

THERE have been months of clandestine meetings, multi-million-pound fees for advisors and a public relations blitz.

Now the bosses behind a German takeover of the London Stock Exchange are increasingly confident their £21bn deal will go ahead.

Both LSE and Frankfurt-based Deutsche Boerse call it a ‘merger of equals’ – but the new company will be led by German chief executive Carsten Kengeter and report profits in euros. Deutsche shareholders will get a 54.4pc controlling stake.

LSE’s French boss Xavier Rolet has stressed he will not benefit financially from the takeover. He will step aside if it goes ahead but continue to provide advice for up to a year afterwards. It is not known how much he will be paid for this.

Rolet’s shares in the 215-year-old institution have risen in value by more than £700,000 since the deal was announced and are now worth £12.7m.

And the tie-up is triggering a £235m fee bonanza for the lawyers, bankers and spin doctors.

Although bosses are increasingly bullish about their ability to overcome critics warning the deal is against Britain’s national interest, five key hurdles could derail it.

BOARDROOM BUST-UP IN FRANKFURT

Deutsche shareholders will signal their support or opposition for the deal during an acceptance period.

This runs until July 12 and 75pc of independent shareholders must give their backing. It could be extended to August 1 if the threshold is missed.

The deal is widely expected to sail through, although some German politicians are opposed as the new company’s corporate headquarters will be in London instead of Frankfurt.

They see this as a missed chance to give Germany greater control of financial markets.

And there has already been opposition from the workers’ union representatives who sit on the board of Deutsche Boerse concerned it would mean the UK making decisions about German workers. Business leaders have also joined in a chorus of dissent.

A UK VOTE TO LEAVE THE EU

Perhaps the biggest risk of all comes from Britain’s EU referendum on June 23.

German shareholders are being asked to swap their shares in Deutsche for a 54.4pc stake in a bigger company.

The deal therefore says LSE will contribute 45.6pc of value in the new business.

If Britain votes to quit – and the polls currently give Leave a sevenpoint lead – they may decide the merged business makes less economic sense, LSE is a less valuable target and they would lose money.

A study by the Economist Intelligence Unit suggests the deal would be an early casualty of a so-called Brexit. But Deutsche and LSE claim a leave vote would make no difference.

RIVAL BID FOR THE STOCK EXCHANGE

Bosses at LSE feel their plan will command strong support from investors – a view boosted by activist hedge fund boss Christopher Hohn.

He helped block an earlier Deutsche takeover of the LSE through his Children’s Investment Fund but said he does not oppose the tie-up this time round.

So far, no shareholders have come out against the deal – but if an alternative was on the table, they might change their tune.

This explains why Rolet (pictured above with his wife Nicole) was desperate to see off a rival offer from the Intercontinental Exchange group in America. He publicly savaged the firm, calling it a ‘slash and burn’ organisation.

ICE later backed away from the deal and British takeover law forbids the Americans from coming back with a new offer until November – and with shareholders due to vote on the Deutsche proposal on July 4, it looks likely to be too late.

But veteran market watchers have pointed out that big deals always take longer than expected.

WATCHDOGS WHO HATE MEGA MERGERS

The takeover would create a stock market behemoth more than ten times larger than its closest European rival, Euronext.

This is likely to raise eyebrows among the 40 global watchdogs which must give their approval.

And the increasingly interventionist European Commission is seen as the biggest potential stumbling block. Competition commissioner Margrethe Vestager has already blocked a mega merger between mobile phone giants Three and O2 this year.

And the French government has raised concerns. Finance minister Michel Sapin said the deal would pose ‘a competition problem’.

REGULATORS WHO FEAR A BAILOUT

As key marketplaces, stock exchanges play a crucial role in their national economies.

They handle payments, offer vital intelligence and provide critical infrastructure which keeps the system running smoothly.

When the takeover was first announced, City grandee Lord Paul Myners warned more work was needed to understand the implications. And he said if the new company collapsed, British taxpayers could be left to foot the bill. In Britain, the Bank of England is responsible for making sure the system runs smoothly.

Sources believe financial regulators are ‘nervous’ about the deal. They said even if it was not blocked, shareholders might be asked to put in more cash to ensure the new firm was in a rock-solid position.

This could make the takeover less attractive – particularly as cost-cutting will only save around £350m a year, a relatively low amount compared to the pair’s £21bn total size.

Deutsche Boerse and the LSE declined to comment.