Deutsche Boerse, LSE to pursue merger

London Stock Exchange Group (above) and Deutsche Boerse reiterated that they will proceed with their planned tie-up despite Brexit.
London Stock Exchange Group (above) and Deutsche Boerse reiterated that they will proceed with their planned tie-up despite Brexit.PHOTO: BLOOMBERG

LONDON • Deutsche Boerse and London Stock Exchange Group (LSEG), whose planned combination is among the biggest deals between European companies right now, reiterated that they will proceed with the tie-up despite the United Kingdom's decision to leave the European Union.

"The decision of the UK to leave the EU makes it ever more important to maintain and foster ties between the UK and Europe," Dr Joachim Faber, chairman of Deutsche Boerse and chairman of the companies' referendum committee, said in a statement.

"We are convinced that the importance of the proposed combination of Deutsche Boerse and LSEG has increased even further for our customers and will provide benefits for them as well as our shareholders and other stakeholders."

London Stock Exchange (LSE) shares slumped 13 per cent to 2,375 pence at 8.29am in London, giving the exchange operator a market capitalisation of US$12.9 billion (S$17.5 billion). Deutsche Boerse's stock dropped 7.1 per cent to €75.83 in Frankfurt.

The drop in LSE shares from the unexpected Brexit decision may put the all-stock deal at risk, even though the companies have long said the tie-up makes sense regardless of the outcome of the vote.

It adds to uncertainties clouding the purchase of LSE, including mounting criticism in Germany about the combined company's proposed headquarters in London.

Potential rival suitors may now also be less likely to make a bid for LSE, said Mr Ben Kelly, an analyst at Louis Capital Markets.

"Not only do you have increased risk of the deal breaking, you also have the argument that a counterbid is even less likely," London-based Mr Kelly said in an interview before the referendum.

"It also could be argued that Deutsche Boerse would be overpaying for a post-Leave-vote LSE. This wouldn't help, as it would lend credence to local opposition of the deal."

As it is currently structured, LSE equity holders would own 45.8 per cent of the enlarged group, while Deutsche Boerse stockholders would get the remaining 54.2 per cent.

LSE shareholders are scheduled to vote on the acquisition on July 4.

Deutsche Boerse shareholders have until July 12 to tender their shares.

LSE and Deutsche Boerse had created a committee to advise their boards on the ramifications of a Brexit, saying the number of possible scenarios the combined firm faces is "impossible to model".

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 25, 2016, with the headline 'Deutsche Boerse, LSE to pursue merger'. Print Edition | Subscribe