London Stock Exchange Group plc and Deutsche Boerse AG have struck a deal to merge to establish a more powerful trading house in Europe. The deal is worth about $30 billion. Their objective is to counter the threat coming from the United States to their markets. It remains to be seen whether there would be any fresh bidding war involving Intercontinental Exchange Inc (NYSE:ICE) as it indicated its interest in acquiring the LSE previously.
About sixteen years ago, Deutsche Boerse tried to take over the London Stock Exchange for the first time and failed. Last month, the two exchanges indicated that they were negotiating for an all-stock merger deal, and now they have confirmed the deal. As a result, the Frankfurt Exchange shareholders would get 54.4% stake in the new company while the shareholders of the LSE getting the remaining 45.6%. LSE Chairman, Donald Brydon, will become the chairman of the merged entity whereas Deutsche Boerse CEO, Carsten Kengeter, would be its CEO.
Both companies have termed the deal ‘a premium free merger of equals’. The two exchanges believe that the coming together will have potential cost savings of $500 million on an annualized basis. The two have also pledged to offer substantial benefits to the fund managers and banks that pay fees to trade and get listed. The exchanges have expressed their confidence that the integrated firm will enhance Europe’s capital markets and be a dominant pan-European bourse.
Right Time For Merger
Kengeter said that it was the right time to merge both the exchanges, LSE’s trading operation with Eurex’s derivatives trading. He also said that the transaction has happened at the opportune time for both companies. The CEO indicated that the transaction would close before the end of the current year failing which early next year. The deal needs to go through regulatory review.
As Britain is about to vote on exiting the European Union, Kengeter dismissed concerns about the impact on the deal. He expressed confidence that the deal would be a successful one irrespective of Britain’s voting outcome.