NYSE owner ICE may gatecrash Deutsche Boerse-LSE merger

Tue Mar 1, 2016 3:20pm EST
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By Noor Zainab Hussain, Esha Vaish and John McCrank

(Reuters) - New York Stock Exchange owner ICE (ICE.N: Quote) said it may make a rival bid for London Stock Exchange (LSE.L: Quote), raising the prospect of a takeover battle with Deutsche Boerse (DB1Gn.DE: Quote) and lifting LSE shares to a record high on Tuesday.

The announcement by Intercontinental Exchange Inc is the latest development in a long string of mergers, bidding wars and failed deals among global exchanges.

The industry has been trying to consolidate for years amid weaker trading volumes and shrinking margins. Instead of stock trading, the exchanges have focused on more profitable businesses, such as derivatives trading and selling market data.

But regulatory concerns about the concentration of power in the hands of a few exchanges, along with nationalist wrangling, have hindered many cross-border deals.

LSE Chief Executive Xavier Rolet has been one of the most vocal advocates of consolidation. In December he laid out his vision of global exchange consolidation, saying he expected three to five "exchange powerhouses" in North America, Europe and Asia.

Whether ICE will follow through with a bid for LSE is not certain. The Atlanta-based exchange said it had not yet approached LSE and may not pursue a deal at all. Nonetheless, news of its interest pushed up share prices of exchanges across Europe.

While Deutsche Boerse is interested in combining with LSE to create a full-service trading powerhouse, analysts said, ICE's interest likely relates to two of LSE's businesses: Clearing and market data. After acquiring NYSE in 2013, ICE kept the New York Stock Exchange and its mainly European-focused derivatives unit, Liffe, but sold off other substantial parts of NYSE's business.

ICE had attempted in 2010 to buy NYSE together with Nasdaq Inc (NDAQ.O: Quote). The two exchanges placed a bid to rival Deutsche Borse's, when the German exchange attempted to buy the Big Board. Regulatory concerns ultimately foiled both Deutsche Borse's and Nasdaq's attempts.   Continued...

A trader passes by a screen displaying the trading info for Intercontinental Exchange Inc. (ICE) on the floor of the New York Stock Exchange (NYSE) March 1, 2016. REUTERS/Brendan McDermid