The Strategist

Merger of the LSE and Deutsche Boerse will lead to massive layoffs

06/02/2016 - 15:12

Merger of the largest European stock exchanges will lead to mass layoffs of employees. It follows from a leaflet to the stockholders that the merger of the London Stock Exchange and Deutsche Boerse with deprive 1250 people of their jobs.

jam_90s via flickr
jam_90s via flickr
1250 employees will be laid off as a result of the merger of the London and Frankfurt stock exchanges. According to a message about organization of a new joint stock company, this step is necessary to achieve the level of savings in the amount of € 450 million by 2019. This is the fifth part of joint operating expenses of the two companies.

The reduction of employees will affect workers in London and Frankfurt, as well as in other international offices of the two stock exchanges. It is expected that this will happen within the first three years after the merger. The layoffs will center around specialists of IT-sector. Now, the both exchanges in total employ around 8700 people worldwide.

Earlier it was reported that leaders of London Stock Exchange and Deutsche Boerse have agreed on the merger’s terms. Under 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 share of LSE. Deutsche Boerse’s shareholders will get one share in the new company for each share of the Frankfurt Stock Exchange, and will own 54.4% of the combined structure. The total purchase price will be £ 21 billion.

As stated by representatives of the companies, the deal will help to find additional opportunities for growth in China, throughout Asia and North America. In addition, the transaction’s sides anticipate that it will help bring additional revenue of € 250 million during the first five years.

Board of Directors of the combined company will be headed by current LSE’s chairman Donald Brydon. His post of Deputy Chairman of the Supervisory Board will be taken by Joachim Faber of Deutsche Boerse. As for General Director of LSE, Xavier Rolet, he will retire in case of the merger’s successful completion.
General Director of the German company Carsten Kengeter is now preparing to take over as CEO of the combined group. In late May, he told reporters in Frankfurt that the merger of the two largest operators in European financial markets will not be finished before I quarter of 2017 due to the regulators’ scrutiny.

Kengeter also criticized the French government, which, according to him, is interested in the transaction’s failure. He noted that the French state owns 6% stake in Euronext NV, which is a rival to Deutsche Börse and the LSE Group.

These comments came in response to statements of Minister of Finance of France, Michel Sapin, and Head of the country’s Central Bank François Villeroy. On Monday, May 30, they expressed concern about possible merger of Deutsche Börse and the LSE Group. Sapin said that such a move would undermine competition and increase the market risks. "We are in the process of risk reduction, - the minister said. - If the concentration (on the market) elevates, the risks will increase." He again called on the European authorities and national regulators to carefully study the deal. Villeroy said that the union of LSE Group and Deutsche Börse will create a company that is "too big to fail".