Daily Management Review

Proposed Deutsche Boerse-LSE Merger could be Gatecrashed by NYSE owner ICE


03/01/2016




Proposed Deutsche Boerse-LSE Merger could be Gatecrashed by NYSE owner ICE
Raising the prospect of a takeover battle with Deutsche Boerse and lifting LSE shares to a record high on Tuesday, New York Stock Exchange owner ICE said it may make a rival bid for London Stock Exchange.
 
As news of Atlanta-based Intercontinental Exchange Inc’s interest pushed up share prices of exchanges across Europe on expectations of further consolidation, the company said it had not yet approached LSE and may not pursue a deal at all.
 
A huge slice of Europe's derivatives market have been grabbed up by ICE ever since it bought NYSE Euronext in 2013 and last week LSE and Deutsche Boerse said last week that they were in talks to create a European trading powerhouse to rival ICE.
 
The shareholders in the German exchange would be given a 54.4 percent stake of a new company in the proposed tie-up which is an all-share merger. However a bigger premium may be offered by Deutsche Boerse - or other rival bidders if the ICE intervenes.
 
There was a rise of 8.8 percent in the shares of LSE to reach 2914 pence.
 
"It's going to force anybody that has been potentially looking at (LSE) to step up or go away," Numis Securities analyst Jonathan Goslin said. Euronext NV, CME and Hong Kong Exchanges and Clearing have also been touted as potential bidders, Goslin added.
 
Hong Kong Exchanges, CME and Euronext all declined to comment.
 
While LSE confirmed it had not received any proposal from ICE, Deutsche Boerse said it had seen ICE's statement but indicated it was not looking to alter its proposed offer.
 
"The company is continuing its merger talks with LSE with no change," Deutsche Boerse said in a statement.
 
People familiar with the matter were quoted by Bloomberg earlier as saying that the CME Group Inc is also working with advisers to potentially challenge the LSE-Deutsche Boerse tie-up, citing people familiar with the matter.
 
If ICE or another non-European bidder makes a move, political and regulatory demands are expected to come to the fore.
 
As LSE and Deutsche Boerse hammer out terms of their agreed merger, the two companies are already walking a political tight-rope between London and Frankfurt.
 
However the pair are betting that they stand a stronger chance of getting approval from European governments and regulators, than if a U.S. operator was involved, a source familiar with the proposed LSE-Deutsche Boerse tie-up said.
 
"Deutsche Boerse and LSE are banking on political backing from Brussels, Berlin and probably also London for a 'European deal' that might support the planned EU capital markets union," the source said.
 
March 29 is the latest that ICE has to make an offer for LSE. Under British takeover rules unless it gets an extension from the UK mergers regulator, Deutsche Boerse must either make a formal offer or announce it will not do so by March 22.

(Source:www.reuters,com) 






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