LSE highlights 'compelling' logic of Deutsche Boerse deal

Fri Mar 4, 2016 5:48am EST
 
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By Noor Zainab Hussain and Anjuli Davies

(Reuters) - The London Stock Exchange Group (LSE.L: Quote) said a potential merger with Deutsche Boerse (DB1Gn.DE: Quote) would be "compelling" as potential rival bidders line-up for the British company which reported a jump in profits on Friday.

The group, which owns Borsa Italiana and the London Stock Exchange, said detailed discussions with Deutsche Boerse were ongoing over a deal to create a pan-European trading house with substantial revenue and cost benefits.

LSE and Deutsche Boerse said last week they were in merger talks, although New York Stock Exchange owner Intercontinental Exchange (ICE.N: Quote) has raised the prospect of a bidding war by saying it was considering making a counter-offer.

Deutsche Boerse and the London Stock Exchange are making a third attempt at creating a European trading powerhouse to take on U.S. rivals encroaching on their turf.

Nearly 16 years after their first merger attempt, the London and Frankfurt exchanges are discussing an all-share deal giving Deutsche Boerse shareholders a 54.4 percent stake and LSE shareholders 45.6 percent of a new company.

It would combine the LSE's share-trading operation with the derivatives trading of Deutsche Boerse's Eurex in a group worth almost $30 billion. It would give the companies similar scale to U.S. exchange ICE (ICE.N: Quote), which has taken a huge slice of the European derivatives markets.

LSE CEO Xavier Rolet, speaking to reporters on a conference call, promoted the potential tie-up as a true 'merger of equals', with a British-based holding company and a unitary board. But Rolet, who will step aside should the deal with Deutsche Boerse succeed, would not comment on any prospective interest from ICE.

The LSE reported a 31 percent increase in full-year adjusted pretax profit to 643.4 million pounds ($910.8 million) from 491.7 million pounds a year earlier, just shy of analysts expectations.   Continued...

 
A man walks past the London Stock Exchange in the City of London in this October 11, 2013 file photo. REUTERS/Stefan Wermuth