With a merger between Deutsche Börse and the London Stock Exchange (LSE) still on track to take place in July, not everyone has embraced the agreement – with no shortage of critics to the landmark merger, many have questioned the plausibility of such an aggregated operation, leading Portugal to call for antitrust actions against the agreement.
How Did We Get Here?
Over the past few months, the merger between Deutsche Börse and LSE has hit a number of speed bumps and in some cases snags, such as the convulsive fallout of the Brexit referendum in the end of June, which would have ramifications on the valuation of the merger.
Despite this, the merger has still steamed forward, now reaching a new hurdle, this time warning of antitrust repercussions, as well as an entity that was capable of sequestering access to alternative forms of finance. As such, Portugal has pushed Europe’s antitrust chief to prevent the $30 billion merger.
Earlier this week, Deutsche Börse announced that it lowered the LSE merger threshold required for acceptances under the Exchange Offer Acceptance Condition from 75% to 60%. Overall, the acceptance period of the Exchange Offer was given an extension of two weeks and will now expire on July 26, 2016. The lowering of the minimum acceptance threshold is in line with the German securities acquisition and takeover act.
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The decision was reflective of feedback from a number of institutional index funds that 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 – index funds represent up to 15% of Deutsche Börse shares.
The merger would negatively impact the functioning of the capital market
According to Portugal’s Finance Minister Mario Centeno, in a letter to Competition Commissioner Margrethe Vestager: “The merger would negatively impact the functioning of the capital market. Such a concentration of trading and trade-related services poses a clear threat to competition. It also endangers the viability of several European stock exchanges.”
Portugal is not the first country to voice such opinions towards the merger – to date, France and Belgium have both expressed their dissatisfaction with the merger, who ultimately serve as vessels strategically suited to push for such actions, given their position in continental affairs. For its part, Portuguese opposition to the merger likely focuses on its own market access through Euronext, of which the Lisbon Stock Exchange is a constituent part.
Portugal has been pursuing a more extant role for its equity markets, which have in recent months heated up. Though the wounds of the 2010-13 debt crisis are still fresh, regardless of the opposition, such fears or concerns are likely to go unanswered barring some fresh development.