–Konditionen remain unchanged
–London will seat the new holding
–Kostensynergien of 450 million euros per year expected
(NEW: details, background)
by Jürgen Hesse and Manuel Priego-Thimmel
FRANKFURT (Dow Jones) – Less than a month after the announcement of their plans to make the German Stock Exchange and the London Stock Exchange ( LSE) Ernst with their merger plans: The Frankfurt stock exchange operator shall now formalize its offer before. The merger is to be implemented under one roof, the company “UK TopCo”. Deutsche Börse shareholders are as announced in February hold 54.4 percent and the LSE 45.6 percent in the merged group.
In order to allay fears that German exchange could in the face of possible counter bids offer more than previously planned. Judging by the current market capitalization of both exchanges, the transaction comes to a value of almost 28 billion euros.
With the merger “of equals” want the two exchange operators provide a globally competitive supplier. Shareholders should benefit from an accelerated growth of the company and the realization of cost and revenue synergies. The cost benefits should reach 450 million euros per year from the third year after completion of the merger. In addition, German Stock Exchange and LSE hope thanks to the expanded global distribution network to significant revenue synergies.
London is “the most international location”
The new company will be London. This, too, was leaked in advance. This point might encounter in Germany on political opposition. The German market accordingly campaigned for the merger: German companies and investors could benefit from the “liquidity bridge” the London, Frankfurt and Milan connecting secondary spot markets. In addition, it was said in the press release, Frankfurt remains the “City of the DAX”.
In London the fusion candidates see but the location of the position as a “leading international financial center” and the “most international listing site”. London have strong links to Asia and the US, of which the joint venture will also benefit as from the broad-based international exchange listings.
Kengeter to be head of the new holding
The Board of Directors of the new company is to be an equal number of members of the LSE and Deutsche Börse. The combined company will retain its headquarters in Frankfurt and London. The German market will have a two-tier system of management and supervisory boards, including participation rights for workers.
The joint holding is to lead as CEO Carsten Kengeter the current head of the Deutsche Börse. LSE chairman Donald Brydon will take over this position in the UK TopCo.
The Holding aims to stock quotation in the Prime Standard on the Frankfurt Stock Exchange and in London. The shares are likely to be included in the Euro Stoxx, Dax and FTSE indices.
Many obstacles on the road to fusion
Whether the proposed merger is now possible, is not only in the hands of shareholders. The policy will exert its influence. but even more decisive is probably how Americans will react to the merger plans. The Bid now submitted the takeover race for the LSE is officially opened. Now are counter bids by the Intercontinental Exchange (ICE) or CME Group likely.
The ICE has already announced that they will not stand by idly simply an association of German Stock Exchange and LSE. The Americans think even after a bid for the London. Under UK legislation, the ICE an offer is at midnight on March 29 to present, they should actually want to start a takeover battle. The CME Group is considering, according to circles a bid for the LSE.
Americans have more financial power
With the offer of Deutsche Börse The ball now lies with the Americans. Eschborn is first possible bids of ICE or analyze the CME before deciding on further action. Both US exchange operators are substantially larger than German Stock Exchange or LSE considered individually and have the deeper pockets. This is especially true on the CME. Against the ICE says that it is already in the process of digesting numerous billion dollar deals.
Meanwhile, the German market has to sell the US subsidiary International Securities Exchange (ISE) provides for € 1.1 billion to the Nasdaq some air. Given the already high level of indebtedness after the acquisitions of 360T and Stoxx were the possibilities of Eschborn, possibly rectify the conditions for the merger with the LSE, low. A sale of the US subsidiary would probably sooner or later queued anyway. That he has now been concluded, no accident is likely to be.
Even regulators keep an eye on Fusion
Even if the Americans should not get in the way, are on the way to a merger of the German stock exchange and the LSE still take numerous hurdles. Not only must approve the operation nor the shareholders of both companies. Just as important for a successful merger is to support the customer. Because the merger does not only make sense for shareholders.
Analysts expect that at least a portion of the anticipated cost synergies will be passed on to the customer. Basically expected European banks to a European exchange solution more interest than in a scenario in which the LSE is the junior partner of a powerful US House. Here there is a danger that virtually via the backdoor US regulations are introduced.
a say a word belonging, even politics and supervisors. In addition to the British and German Exchange Commission and the State of Hesse and the Brussels competition authorities must approve a merger. The audit is expected to take months. Analysts agree: Each of the three counterparties must convince them that a merger of its clearing house with the LSE does not violate antitrust authorities.
The firmierende as LCH.Clearnet clearing house business the London Stock Exchange dominated global clearing services for interest rate swap derivatives and is the part of the LSE, the competition sought after most. Clearing houses are intended to prevent a market-wide collapse, by ensuring that all trading partners their money even reunion, if one of them should be slipping into bankruptcy. They are therefore relevant to the system.
criticism of the holding seat London
In addition, critics fear that, despite the two head offices in London and Frankfurt, the focus of the new exchange will be in London. The German Exchange Commission has already announced its intention to examine after receipt of valid documentation, whether the operation or development of the stock exchange operation at Frankfurt Airport may be affected by the proposed merger.
German-Börse CEO Carsten Kengeter is because not tired, provide reassurance to a merger. The merger of the two most important financial centers in Europe is an opportunity for both. From a zero-sum game could be no question. “Mir is the financial center of Frankfurt Rhein / Main very important, and I see myself in the obligation to do something for this financial center,” Kengeter said recently on the “SZ-Finanztag” in Frankfurt.
Parent should Europe’s politicians on an intra-European solution more delight than a LSE-sale in the United States. The merger plans of German Stock Exchange and LSE could the EU’s efforts for the establishment of a capital market Union (CMU) play into the hands. The aim of the CMU is the European Financial Markets more integrated, not only to make them more resistant, but also to additional sources of capital for companies to open up.
The great unknown in the bill is a possible “Proposed referendum on United Kingdom membership of the European Union”. End of June to decide the British about the whereabouts of their country in the EU. At present the outcome is completely open. A withdrawal of Britain would not only change the face of Europe, as we know it so far, but could also torpedo the merger plans of German Stock Exchange and LSE.
Contact the author unternehmen.de@dowjones.com
DJG / jhe / smh
(END) Dow Jones Newswires
March 16, 2016 04:16 ET (08:16 GMT)
Copyright (c) 2016 Dow Jones & amp; Company, Inc. – 04 16 AM EDT 03-16-16
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