Daily Management Review

UK Exchange Says It Won’t Meet Disposal Deadline, Puts LSE-Deutsche Börse’s $31 Billion Merger In Doubt


02/27/2017




UK Exchange Says It Won’t Meet Disposal Deadline, Puts LSE-Deutsche Börse’s $31 Billion Merger In Doubt
Confirmation of a potential merger between London Stock Exchange and Deutsche Boerse was announced on Tuesday by the board of the boards of the two firms.
 
After the U.K. exchange said it would not be able to meet a last-minute antitrust request from the European Commission, the 29 billion euro ($30.65 billion) tie-up between the London Stock Exchange (LSE) and Deutsche Börse has been thrown into doubt.
 
The LSE said it would not present the disposal plan by midday Monday as requested by the European regulator on February 16 while describing the request to sell its 60 percent stake in MTS, an Italy-based fixed income electronic trading platform, as "disproportionate".
 
"Following dialogue with Italian authorities about the Commission's required remedy and given prior discussions between the principals and Italian authorities regarding LSEG's Italian businesses in the context of the Merger, the LSEG Board believes that it is highly unlikely that a sale of MTS could be satisfactorily achieved, even if LSEG were to give the commitment," according to a statement released by the U.K. exchange on Sunday evening.
 
"Moreover, the LSEG Board believes the offer of such a remedy would jeopardise LSEG's critically important relationships with these regulators and be detrimental to LSEG's ongoing businesses in Italy and the Combined Group, were the Merger to complete," the announcement continued.
 
The European Commission would be unlikely to provide clearance for the tie-up given its current position, conceded the LSE statement.
 
No comments were given by either exchange when the media contacted them on the issue.
 
The European Commission would be unlikely to provide clearance for the tie-up given its current position and post this development came the European Commission's request – which was described as unexpected by the U.K. exchange.
 
In order to counter authorities' concerns over the concentration of derivatives clearing activities at a post-merger combined company, the submission outlined plans to sell the LSE's French clearing arm to Euronext for 510 million euros.
 
However growing apprehensions among politicians in both the U.K. and Germany that either of Europe's two largest financial hubs might cede ground to the other once a merger completes are running alongside competition concerns.
 
Extra impetus to this imperative for British politicians would have been added to the fears over the continued dominance of the City of London in a post-Brexit. Furthermore, reservations about the deal taking place with regards to competitive implications for their own domestic exchanges have been expressed by the lawmakers in other European countries including France, Belgium, Portugal and the Netherlands.
 
While Deutsche Börse shares were trading 2.88 percent lower, LSE shares were down 3.34 percent shortly after 10am London time.
 
(Source:www.cnbc.com)
 






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