Frankfurt and London seal $30 billion trading tie-up to counter U.S. threat

Wed Mar 16, 2016 8:59am EDT
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By Jonathan Gould and Huw Jones

FRANKFURT/LONDON (Reuters) - Deutsche Boerse AG (DB1Gn.DE: Quote) and London Stock Exchange Group Plc (LSE) (LSE.L: Quote) agreed to combine in a $30 billion deal to create a European trading powerhouse better able to compete with U.S. rivals encroaching on their turf.

But the deal, which marks a third attempt to link the Frankfurt and London exchanges, may prompt a takeover war after New York Stock Exchange owner Intercontinental Exchange (ICE.N: Quote) said it may bid for the British group.

Nearly 16 years after Deutsche Boerse first tried to take over LSE, the exchanges said last month they were discussing an all-share merger, which they confirmed on Wednesday would give Deutsche Boerse shareholders 54.4 percent and LSE investors 45.6 percent of a new company.

This offers a unique opportunity for Frankfurt which has always played second fiddle to London as a global financial center, something recognized by the German government which said it would welcome the deal if it strengthened Frankfurt.

If it goes ahead, the combination would create the world's biggest exchange by revenue, forecast at 4.7 billion euros this year from stock, bond and derivatives trading, indices, market data, and clearing and settlement.

The exchanges sought to sell the deal to investors with the lure of annual cost savings of 450 million euros ($500 million).

They also promised users - the banks and fund managers who pay fees to trade and companies who pay to be listed - "substantial benefits", but gave no figures.

And in a clear effort to win over Europe's politicians to the benefits of a dominant pan-European exchange, Deutsche Boerse Chief Executive Carsten Kengeter said it would enable Europe to enhance its capital markets.   Continued...

The plaque of the Deutsche Boerse AG is pictured at the entrance of the Frankfurt stock exchange February 1, 2012. REUTERS/Alex Domanski