Europe’s biggest stock exchange merger on verge of collapse

Europe’s biggest stock exchange merger on verge of collapse


A year of negotiations towards a merger of the London Stock Exchange (LSE) and Deutsche Börse, Frankfurt’s Stock Exchange, is on the brink of collapse.

The LSE has refused to allow Deutsche Börse to add new terms to the £21 billion deal following the Brexit vote amid an increasingly tense political climate with several eurosceptic MPs expressing concern over Deutsche Börse’s 54 percent stake.

It had been agreed following the merger that the headquarters would be based in London, but, responding to German concerns after the referendum result, Deutsche Börse has since put forward plans, which the LSE has rejected, to create a dual-holding company, the second headquarters of which would be in Frankfurt with both supplemented by a joint-operating company.

Deutsche Börse’s chief executive Carsten Kengeter has also worried bankers with reports that London could lose some key roles saying that the exchange would create 400 new jobs with 300 of them in Frankfurt.

Furthermore, a report commissioned by Deutsche Börse published in January claiming that the German city would be the big winner from the deal is also said to have put the LSE on edge.

It now appears that plans for the merger have collapsed as the LSE has also refused an EU request to sell their part of its Italian trading arm MTS, a move that has stunned the City and meant that the European Commission are highly unlikely to approve the deal.

LSE had already agreed to sell of part of their clearing business, LCH, to satisfy competition concerns before the commission’s new demand concerning MTS.

While Kengeter expressed his “regret” at the LSE’s move to kill off the merger, he was confident about Deutsche Börse’s future.

“It is pointless to me to speculate on what the reasons behind our merger partner’s decision were,” Kengeter told an audience in Frankfurt. “We feel very well-prepared as a company for the future.”

The commission has refused to comment before a deadline for delivering its formal verdict on 3 April.

It is the third attempt to unite the two major stock exchange operators, following two failed attempts, in 2000 and 2005. Rumours have since begun to emerge that LSE may have found a new potential suitor in ICE, owners of the New York Stock Exchange.

About author