28 Feb 2017

No Happy Ending for LSE and Deutsche Börse

The long-anticipated merging deal between The London Stock Exchange(LSE) and the German Deutsche Börse (DB) has failed after a dramatic day of negotiations. The £21 billion merge, that was expected to change the face of modern stoke trading over Europe, was stopped by the EU following the refusal of the UK operator to sell its Italian government bond-trading arm.

10 years ago, LSE merged with Borsa Italliana in a £2 billion deal, shortly after Borsa Italliana had bought the rights over MBE Holdings, controlling Mercato dei Titoli di Stato (MTS). The deal allowed the groups to combine their existing bong-listing business and thus to expand the range of covered European fixed income markets. Ever since, the electronic trading platform became an important division of the Group. “The LSE board believes it is highly unlikely that a sale of MTS could be satisfactorily achieved, even if LSE were to give their commitment. Moreover, the LSE board believes the offer of such a remedy would jeopardise LSE’s critically important relationships with these regulators [in Italy] and be detrimental to LSE’s ongoing businesses in Italy and the combined group, were the merger to complete,” the official of LSE stated.

Before the merge failed, the UK group made a positive arrangement with the EU by agreeing to sell of its French division LCH.Clearnet. The deal was cleared in January and was thought to open the road for the future union with the German consortium. Two weeks later, the EU Commission surprisingly changed the requirements by focusing on Italy.

The collapse of the deal was the third unsuccessful attempt of the LSE and DB to merge. The other two trials were in 2000 and 2005. After announcing the failed negotiations, the shares of both companies fell with 5% for DB and 3% for LSE.

According to analysts, though, there is light at the end of the tunnel. The failed merge will now allow the UK giant to look for another potential partner, most likely New York Stock Exchange owned ICE, which expressed an interest for a merge last year.