The Strategist

Deutsche Boerse and the London Stock Exchange Agreed on Terms of Merger

03/16/2016 - 14:18

This morning, management boards of the Frankfurt and London stock exchanges announced harmonization of the conditions of the two marketplaces’ merger. Shareholders of Deutsche Boerse and the London Stock Exchange are recommended to support the deal worth £ 21 billion, which will be carried out through an exchange of shares and will lead to creation of the largest stock exchange in Europe.

Dontworry via wikimedia commons
Dontworry via wikimedia commons
In a morning joint statement published today, management of the Frankfurt and London stock exchanges announced the agreement on the merger of equal conditions through the exchange of shares. If the deal is approved by shareholders of Deutsche Boerse and the London Stock Exchange (LSE), Europe will welcome the largest stock exchange. This will happen 16 years after the very first attempt to combine the two marketplaces. Deutsche Boerse’s previous attempts to buy the LSE were undertaken in 2000 and 2005, yet failed. Now, however, the transaction is positioned as a merger of equals. Recall that the two exchanges, largest in Europe by market capitalization, came out with beginning of negotiations on the possible merger at the end of February. The deal could total £ 21 billion ($ 30.5 billion).

Under the terms of the transaction, 45.6% of the combined structure will belong to shareholders of LSE, who will receive 0.4421 shares in the new company for each LSE share. Deutsche Boerse’s shareholders will get one share in the new company for Frankfurt Stock Exchange’s each share, and will own 54.4% of the combined structure. According to estimates of both merging parties, synergy from this transaction would amount to € 450 million per year.  

Donald Brydon, Chairman of the LSE’s Board of Directors, will become Chairman of the combined structure’s board of directors. Post of his deputy will receive the Chairman of Deutsche Boerse’s Supervisory Board Joachim Faber. LSE’s General Director Xavier Rolet will retire in the case of the merger’s successful completion. However, he is going to help acting as an advisor to the chairman and his deputy for the duration of the transitional period. The new structure will be registered as a British company with a primary listing in the FTSE 100 index. Above that, it will also be listed on the stock exchange in Frankfurt, with headquarters in London and Frankfurt.

Now, it’s turn of the both stock exchanges’ shareholders to take the decision. Besides, there are EU, US and Russian antitrust regulators. After the announcement on the merger conditions’ harmonization, shares of Deutsche Boerse rose in the morning trading by 2%, but then returned to their original positions. LSE’s shares also climbed first by 1.8%, and went to a small minus in the afternoon.


< >

Wednesday, April 17th 2024 - 08:20 UBS may need to increase its capital by up to $25 bln