takeover talks

LSE Boss Warns Americans Off Hostile Bid

LSE
Intrigue about the merger of the London Stock Exchange, pictured, is rife.
  • Why it matters

    Why it matters

    A hostile takeover bid by the U.S. Intercontinental Exchange could scupper the plans of LSE and Deutsche Börse plans, and weaken the European exchanges.

  • Facts

    Facts

    • The LSE and Deutsche Börse announced they were in merger talks six months ago.
    • If the two exchanges merged, they could become the world’s largest exchange by revenue.
    • The deal is threatened by both a potential ICE counter-offer and possible objections by E.U. competition watchdogs.
  • Audio

    Audio

  • Pdf

Xavier Rolet, the London Stock Exchange boss, has warned American competitors against launching a rival takeover bid for the British exchange, which is currently in merger talks with Germany’s Deutsche Borse.

He made his comments after it emerged that U.S. stock market operator Intercontinental Exchange was preparing to make an offer for London Stock Exchange, and that the Americans had already secured the necessary financing.

“I don’t want the LSE ever again to be on the receiving end of a hostile takeover, where you come in, you get what you want, you chuck out the rest – this is not what it is about,” said Mr. Rolet in an interview with British newspaper City.

Mr. Rolet was referring to ICE’s take over of the New York Stock Exchange, which had in 2006 merged with Euronext, a European multi-country exchange. ICE acquired the merged company in 2013, sold off portions of it and then radically restructured the remainder.

The fact that the two exchanges dominate the the processing of derivative transactions could get in the way of the deal.

Hardly anything is left of Euronext, and Mr. Rolet said he did not want the same fate to befall LSE.

He expressed similar views in an interview with the Wall Street Journal, saying: “We have no interest in being Euronexted. It is not illegitimate for you to want a better future than that.”

Mr. Rolet acknowledges that the board of directors of the LSE would have to examine a counter-offer from across the Atlantic. But he also made it clear that board would have to clearly consider the current plans before approving them.

Six weeks ago, the LSE and Deutsche Börse confirmed that they were in merger talks. Together, they hope to become the world’s largest exchange by revenue. Deutsche Börse is currently in fourth place, followed by the LSE in fifth.

The deal could fail because of a counter-offer from the United States, but also if it is vetoed by the E.U.’s competition watchdogs. According to analysts, the fact that the two exchanges dominate the the processing of derivative transactions could get in the way of the deal. Deutsche Börse subsidiary Eurex and LCH Clearnet, in which LSE holds a 58-percent stake, are among the leading providers of those transactions.

In addition, heavyweights in the London financial world also recently expressed criticism of the merger plans. The LSE is important for Great Britain, Mervyn Davies, a former banker and government minister, said in a discussion forum hosted by the Financial Times. For this reason, he added, the British government should examine whether a merger between the LSE and Deutsche Börse is in the country’s interest.

Jean-Pierre Mustier, a former top investment banker at Unicredit and Société Générale, agreed, saying that London needs an independent LSE, “for the good of Great Britain.”

 

233 London Stock Exchange-LSE WTB 2015 resume01

 

Michael Brächer is a financial editor in the investment team in Frankfurt. Katharina Slodczyk is Handelsblatt’s London correspondent. To contact the authors: slodczyk@handelsblatt.com and braecher@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!