LSE, Deutsche Börse in potential equals merger

While the starting gun has well and truly been fired on the race to convince the UK electorate to vote to leave or stay in the European Union, Deutsche Börse and the Board of LSE have issued a briefing note to confirm that they are in detailed discussions about a potential merger of equals of the two businesses, the larger part of which would be owned by existing Deutsche Börse shareholders. The combined group would have a unitary board composed of equal numbers of Deutsche Börse and LSE directors.

The two boards say they believe that the Potential Merger would represent a compelling opportunity for both companies to strengthen each other in an industry-defining combination, creating a leading European-based global markets infrastructure group.

The combination of Deutsche Börse and LSE’s complementary growth strategies, products, services and geographic footprint would be expected to deliver an enhanced ability to provide a full service offering to customers on a global basis. Deutsche Börse and LSE believe that the Potential Merger would offer the prospect of enhanced growth, significant customer benefits including cross-margining between listed and OTC derivatives clearing (subject to regulatory approvals), as well as substantial revenue and cost synergies and increased shareholder value. All key businesses of Deutsche Börse and LSE would continue to operate under their current brand names. The existing regulatory framework of all regulated entities within the combined group would remain unchanged, subject to customary and final regulatory approvals.

Discussions are ongoing regarding other terms and conditions. Under the UK City Code on Takeovers and Mergers, the new holding company or Deutsche Börse are required, by no later than 5.00 p.m. on March 22 2016 (if not extended with the consent of the UK Takeover Panel), to do one of the following: (i) announce a firm intention to make an offer for LSE in accordance with the Code; or (ii) announce that they do not intend to make an offer and that they will not make an offer for LSE for a period of six months.