European Stock Exchanges Merge

© AP Photo/Michael Probst

European stock exchanges agree to $30 billion merger - The London Stock Exchange and Germany's Deutsche Boerse say they are merging in an all-stock deal that will leave the German side with a majority in a company worth about $30 billion.

The exchange operators are calling it a merger of equals that will accelerate their growth and offer customers more products and services — and said the deal is going ahead even if Britain votes to leave the European Union.

They expect to complete the combination by the first quarter of 2017. The two companies together are worth about $30 billion based on their stock market value Wednesday.

The deal makes sense even if British voters decide to leave the European Union in a referendum June 23, the two sides said, but conceded there are risks to its business from a potential British exit. It said the tie-up would benefit from European Union efforts to create a single capital market and expand the cross-border use of stock and bond markets to finance companies, a project known as capital markets union. They said that a vote to leave would put the capital markets union project at risk.

The companies "believe that the merger is well positioned to serve global customers irrespective of the outcome of the vote" although the outcome "might well affect the volume or nature of the business carried out by the combined group."

The owner of the New York Stock Exchange said March 1 that it was considering a competing bid for the London exchange. Intercontinental Exchange, Inc., which owns the NYSE, had no comment on the proposed LSE-Deutsche Boerse deal. Another U.S. rival, CME Group Inc., also declined to comment.

In the merger deal, a U.K.-based holding company will be set up to acquire the London Stock Exchange Group PLC and Frankfurt-based Deutsche Boerse AG. When the deal is done, Deutsche Boerse shareholders will hold 54.4 percent of the holding company and Deutsche Bank CEO Karsten Kengeter will be chief executive. LSE chief executive Xavier Rolet is to step down on completion of the deal and serve as an advisor for up to one year.

Both companies will name an equal number of board directors in the new company; LSE chairman Donald Brydon will serve as board chair.

The combined company would have headquarters in both London and Frankfurt.

The deal needs approval from regulators in the European Union, the U.S. and Russia. The London Stock Exchange said Russian approval was needed because it owns Exactpro, a firm with offices in Russia specializing in quality assurance for exchanges and financial organizations.