Daily Management Review

Portugal appealed LSE and Deutsche Boerse's merger


Portuguese authorities have appealed to the European Commission with a protest against the merger of the German group Deutsche Boerse and the London Stock Exchange.

Eva K.
Eva K.
Finance Minister of Portugal Mario Centeno said that merger of the largest stock exchanges in Europe - the Frankfurt Stock Exchange (part of Deutsche Boerse) and the London Stock Exchange - will have a negative impact on Europe's capital markets, and will be a clear violation of the antimonopoly legislation.

Head of the Portuguese Ministry of Finance wrote a letter to the European Commissioner for competition Margrethe Vestager. A copy of Lisbon’s official statement with objections to the transaction came at Reuters disposal.

"This merger will have a negative impact on the functioning of capital markets in Europe. Such concentration of trade and trade-related services is a clear threat to competition. The deal also threatens survival of a number of stock exchanges in Europe. The European Commission has the capacity and authority to prevent this disruption of the market competition. "

Mario Centeno expressed concern about Portugal's further access to financial markets because of the potential adverse effects for the Lisbon Stock Exchange, which is part of the Euronext group.

The French news-maker Les Echos has published full text of Portugal’s Finance Minister with appeal to the European Commissioner for Competition. The article also notes that earlier, the official representatives of France and Belgium have made objections against Deutsche Boerse and the London Stock Exchange’s merger.

In particular, as noted by Les Echos, the Belgian Finance Minister, Johan Van Overtveldt also sent a letter to the European Commissioner Margrethe Verstager. His statement notes that the deal could have an adverse effect on small companies’ potential to access capital. Mr. Van Overtveldt is also concerned that the deal would take liquidity out of the smaller exchanges - specifically, the Brussels Stock Exchange (also part of the Euronext group).

Plans for Deutsche Boerse and the London Stock Exchange’s merger were announced in March this year. In case of transaction is done, the combined company can become the largest exchange operator in the world in terms of revenue and the second by market capitalization (after the American CME Group).

Above that, there is another purpose - to compete with the Americans in the derivatives market, where European business lags far behind.

LSE shareholders will receive 45.6% of the new company, and Deutsche Boerse’s shareholders will own 54.4%. The new board of directors will include an equal number of representatives of LSE and Deutsche Boerse. Donald Brydon, who now heads LSE’s board will now become the combined company’s Chairman of the Board of Directors. Chief Executive Officer of Deutsche Boerse Carsten Kengeter will become CEO of the new company.

The companies expect that the merger would reduce their costs of € 450 million annually. The best ways to cut costs are use of new technologies, abolition of overlapping functions and optimization of business segments’ number of.

After the Brexit referendum, shares of Deutsche Boerse immediately fell by almost 7%. Nevertheless, representatives of the trading platforms quickly responded and assured that Brexit will not affect their plans.

source: reuters.com