London Stock Exchange highlights ‘compelling’ logic of Deutsche Boerse deal

LONDON - Reuters

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The London Stock Exchange Group said a potential merger with Deutsche Boerse would be “compelling” as potential rival bidders line-up for the British company which reported a jump in profits on March 4.

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 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, 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.

“A small miss on results, combined with a lack of material new information on the deal is likely to weigh slightly on the shares this morning,” analysts at Exane BNP Paribas wrote in a note.

Revenue rose 78 percent to 2.28 billion pounds. Revenue includes both continuing and discontinued operations and excludes unrealized gains and losses for 2014 at LCH.Clearnet.