The London Stock Exchange and Deutsche Börse are contemplating a merger, a report by Reuters has stated. Citing sources with knowledge of the matter and defying all odds of a Brexit, the London Stock Exchange, the only global stock exchange in Europe, is allegedly in talks to merge with the biggest stock exchange in Germany.
While no official information has been confirmed or denied by the exchanges, traders wasted no time. Shares of the London Stock Exchange Group (LON:LSE) have exploded higher by 13.5 per cent after the report, while Deutsche Börse (ETR:DB1) traded higher by 3 per cent.
Update: The Potential Merger would be structured as an all-share merger of equals under a new holding company. 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. The Combined Group would have a unitary board composed of equal numbers of LSE and Deutsche Boerse directors.
“The Boards believe that the Potential Merger would represent a compelling opportunity for both companies to strengthen each other in an industry-defining combination, creating a leading European-based global markets infrastructure group,” the statement added.
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Reuters stated that the discussions were at an early stage. Any prospective merger agreement could be further complicated by the incoming vote on the state of the United Kingdom’s membership of the European Union.
With months of uncertainty ahead of the vote, the likelihood of big business transactions between the U.K. and continental Europe entities is likely to grind to a halt, due to the split vote on the E.U. membership.
The London Stock Exchange is the largest exchange in Europe ahead of pan-European Euronext and is the only exchange on the old continent which is global.
This would be the second time that the companies have attempted a merger: in 2001, the German exchange tried to merge with the London Stock Exchange. The discussions were followed by a takeover bid, in 2014, which was swiftly rejected by LSE shareholders.
Deutsche Börse later attempted a merger with Euronext, however a possible conclusion was superseded by the New York Stock Exchange’s bid for Euronext in 2006.