They’re having another go. Perhaps to stave off a nationalistic backlash against a foreign takeover of one of the UK’s institutions, this time London Stock Exchange (LSE) and Deutsche Börse are presenting their proposed tie-up as a “merger of equals”. That is, a merger where LSE shareholders end up with 46 per cent of the combined group and their DB counterparts hold 54 per cent.
In practical terms, that would mean LSE shareholders receive 0.4421 new shares in the enlarged entity for each they currently hold, and DB shareholders would receive one for one. The worthy goal is to create a “leading European-based global markets infrastructure group”.
But market-watchers were quick to point out the challenges to the deal, principally on competition grounds. Regulators will have to be comfortable with creating such a dominant exchange and clearing house, as well as sandwiching together two strong index businesses, FTSE and Stoxx. There is also the wider question of which regulator would sit behind the entity as the market-maker of last resort for its clearing house, as the Bank of England currently serves for the LSE's LCH.Clearnet.
A formal announcement awaits agreement on terms and conditions, due diligence and of course board approval. Deutsche has until 22 March to announce a firm intention to make an offer.
