LSE DEAL

Deutsche Börse's Search for a Home

FILE - epa05213894 A file photo dated 16 March 2015 showing stock brokers working at the stock exchange in Frankfurt, Germany. EPA/FRANK RUMPENHORST (zu dpa «Deutsche Börse legt im Tagesgeschäft zu - Quartalszahlen erwartet» vom 26.07.2016) +++(c) dpa - Bildfunk+++
Picture Source: DPA
  • Why it matters

    Why it matters

    • Deutsche Börse has to convince regulators in Brussels that its planned merger with the London Stock Exchange is in the European Union’s best interest after Britain’s vote to leave the bloc.
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  • Facts

    Facts

    • European regulators have expressed opposition to plans by Deutsche Börse and the London Stock Exchange to have a headquarters in London after their planned merger.
    • Deutsche Börse had to extend the deadline for a shareholder vote and lower the threshold from 75 percent to 60 percent amid concerns about how Brexit would impact the planned merger.
    • The Netherlands, Portugal, France and Belgium have all criticized the planned merger on competition grounds, arguing it would negatively impact other stock exchanges in Europe.
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Deutsche Börse is considering several options to address regulators’ concerns about its location after a planned €25-billion ($27-billion) merger with the London Stock Exchange, according to information obtained by Handelsblatt

Under the original plan, the merged stock exchange would have its headquarters in London, but European regulators have thrown cold water on that idea in the wake of Britain’s vote to leave the European Union.

“We are reviewing all options, no decision has been made,” a source in the financial sector told Handelsblatt.

“It's still not clear what the E.U. exit means for European firms with a seat in Great Britain.”

Christoph Schalast, Frankfurt School of Finance

At least two different scenarios are under consideration. Under the first scenario, the merged stock exchange would keep its seat in London, but change its legal form from a British joint-stock company to a so-called Societas Europaea under E.U. law. But experts view this scenario with skepticism.

“I can’t imagine that a Societas Europaea is the right solution,” Christoph Schalast of the Frankfurt School of Finance told Handelsblatt. “It’s still not clear what the E.U. exit means for European firms with a seat in Great Britain.”

Under the second scenario, the merged stock exchange would move its holding company to Frankfurt but also have a headquarters in a neutral second location. Deutsche Börse declined Handelsblatt’s requests for comment on the issue of the merged exchange’s future location.

But the chief executive of the London Stock Exchange, Xavier Rolet, has said the current plan to have a the merged exchange’s headquarters in London stands and a change in location should be considered only after the deal is approved.

Deutsche Börse’s shareholders approved the planned merger last month after the stock exchange operator extended the deadline and lowered the approval threshold from 75 percent to 60 percent in the aftermath of Britain’s vote to leave the European Union.

A few weeks earlier, the shareholders of the London Stock Exchange approved the deal with more than 99 percent of votes cast in favor of the merger.

But skeptical European regulators still have to approve the deal. The head of Germany’s financial market regulator BaFin, Felix Hufeld, said it was “difficult to imagine” that the most important stock exchange for the euro zone would be run outside of the European Union.

Deutsche Börse and the London Stock Exchange plan to submit their application to the European Commission, the E.U. executive body, by earlier September at the latest.

But the merger could face anti-trust complaints. Dutch Finance Minister Jeroen Dijsselbloem has warned the European Union’s competition commissioner Margrethe Vestager that the deal could have “negative consequences” for other stock exchanges.

Belgium, France and Portugal have also criticized the merger in the past. The multinational Euronext exchange operates in all four countries.

 

Michael Brächer and Yasmin Osman cover the banking industry from Frankfurt. Katharina Slodczyk is a correspondent in London. To contact the authors: braecher@handelsblatt.com, osman@handelsblatt.com, slodczyk@handelsblatt.com

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