EU blocks Deutsche Boerse's US$14 billion takeover of LSE

European Competition Commissioner Margrethe Vestager speaks during a press conference in Brussels on March 29, 2017, about the EU decision to block the LSE-Deutsche Boerse merger.
European Competition Commissioner Margrethe Vestager speaks during a press conference in Brussels on March 29, 2017, about the EU decision to block the LSE-Deutsche Boerse merger.PHOTO: AFP

BRUSSELS (BLOOMBERG) - European Union regulators dealt a final blow to Deutsche Boerse's planned takeover of London Stock Exchange Group, a symbolic block on EU-UK integration on the same day Britain formally serves notice of its decision to quit the EU.

The US$14 billion (S$19.5 billion) deal to create Europe's biggest exchange would have harmed competition in the soon-to-be 27-nation EU by creating a de facto monopoly for clearing bonds and repurchase agreements, the European Commission said in an e-mailed statement Wednesday (March 29). The decision, flagged last month by LSE, thwarts Deutsche Boerse's expansion just five years after the EU also banned a proposed tie-up with NYSE Euronext.

"The commission cannot allow the creation of monopolies and that is what would have happened in this case," Ms Margrethe Vestager, the EU's antitrust commissioner, told reporters in Brussels. LSE was "not prepared" to sell a small unit that would have removed concerns that the combined firm could have weakened rival Euronext.

EU regulators have become increasingly tough on big deals, demanding weighty concessions to eliminate overlapping businesses amid concerns that a combined firm could dominate an industry and increase prices. While this is the second time that Ms Vestager has formally blocked a merger, several transactions have been ditched over antitrust opposition.

Deutsche Boerse confirmed the deal's collapse shortly after the decision. When the exchange receives the formal notice, the merger agreement "will automatically terminate," the German company said in a statement.

 

"The prohibition is a setback for Europe, the Capital Markets Union and the bridge between continental Europe and Great Britain," Deutsche Boerse chairman Joachim Faber said in an emailed statement. "A rare opportunity to create a global market infrastructure provider based in Europe and to strengthen the global competitiveness of Europe's financial markets has been missed."

Opposition to the Frankfurt-based exchange's merger plans went up a gear after the U.K. voted to leave the EU last year. German concerns over moving the combined firm's headquarters to London added to political riptides over clearing euro trades outside the euro area.

LSE signaled last month that it didn't expect to win EU antitrust approval, saying the European Commission's demand that it sell its MTS unit, a trading platform in Italy for government bonds, was impossible.