Deutsche Börse May Reduce LSE Shareholder Approval Theshold Ahead of Merger

The parties are evaluating the lowering of the minimum acceptance threshold to enable index funds to participate in the offer.

Deutsche Börse has announced that it may reduce the threshold for shareholder approval of its London Stock Exchange Group acquisition in order to accommodate index funds.

The public exchange offer is subject to a minimum acceptance threshold of 75% of the shares in Deutsche Börse.

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Index Funds

Index funds, which represent up to 15% of Deutsche Börse shares, are only technically capable of tendering their Deutsche Börse shares after the minimum acceptance threshold has been reached and once the untendered shares are replaced by the tendered shares in the respective index.

For the DAX as the most relevant index the replacement takes place two trading days after 50% of the shares have been tendered.

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For STOXX and MSCI the thresholds are 75% and above. As most institutional shareholders only tender their shares on the last day of the initial offer period, the respective threshold will not be achieved prior to that day, hence the replacement will take place after the end of the initial offer period. By reducing the acceptance threshold that technical issue could be addressed.

Imminent Decision

Deutsche Börse investors have until 12 July to tender their shares, while LSE shareholders approved the merger last week in a near-unanimous vote.

The German exchange’s management has also argued that the UK’s decision last month to leave the European Union makes the merger even more important. As well as concerns that insufficient Deutsche Börse shareholders may approve the transaction, Brexit has also raised issues relating to whether London will retain its role in euro-denominated clearing, as reported by Finance Magnates last week.

On Monday, 11 July 2016, the facts will be evaluated by the parties involved, after which a decision will be made regarding whether the threshold will be lowered.

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