London Stock Exchange and Deutsche Boerse Agree on Merger Terms

The bidding war which was anticipated after ICE and CME had voiced their interest in the LSE has not materialized

Deutsche Boerse AG (ETR:DB1) and London Stock Exchange Group (LON:LSE) have today announced that the companies have reached a merger agreement. As a result, the prospects for a bidding war between the CME (Chicago Mercantile Exchange) Group and the ICE (InterContinental Exchange) have been dispelled.

A bidding war between the CME Group and the ICE was not to be

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The companies have reached an agreement to merge and create one of the biggest players on the market, which will be streamlining a product list of multiple asset classes – derivatives, equities, fixed income, FX and energy products.

The unexpected quick conclusion of the deal has come less than a month after initial reports about the companies merging. Under the terms of the potential merger, LSE shareholders would be entitled to receive 0.4421 new shares in exchange for each LSE share and Deutsche Boerse shareholders would be entitled to receive one new share in exchange for each Deutsche Boerse share.

Based on this exchange ratio, the parties anticipate that Deutsche Boerse shareholders would hold 54.4 per cent, and LSE shareholders would hold 45.6 per cent of the enlarged issued and to be issued share capital of the Combined Group.

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The negotiations between the companies are coming at a particularly challenging time, in the face of discussions about a European Union exit, which is to be voted on by the public in the United Kingdom in June.

Strengthening the link between Frankfurt and London will strengthen European capital markets

Commenting on the announcement the CEO of Deutsche Boerse, Carsten Kengeter, said: “Strengthening the link between the two leading financial cities of Europe, Frankfurt and London, and building a network across Europe with Luxemburg, Paris and Milan will strengthen European capital markets.

As a combined group we will create a European player that will compete on a global basis. Shareholders will have an opportunity to benefit from this industry defining and value enhancing combination through the execution of an accelerated growth strategy and the realisation of cost and revenue synergies,” he added.

The LSE’s CEO Xavier Rolet added: “We are creating an industry-defining combination which will be a leading global market infrastructure business, very well positioned to create new benefits and efficiencies for our customers and increase value for our shareholders. Our highly complementary businesses will accelerate growth. Our shareholders will also benefit from substantial cost and revenue synergies.”

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