Sunday, May 26, 2024

London Stock Exchange in Merger Talks With Deutsche Börse

Even after Deutsche Börse failed to merge with the N.Y.S.E., it has struck a number of acquisitions.

Four years ago, Deutsche Börse called off an effort to merge with the parent of the New York Stock Exchange, after European antitrust regulators threatened to block the combination.

Now, the German market operator is willing to try another deal — this time with the London Stock Exchange.

The two exchanges said on Tuesday that they were in talks to combine in an all-stock deal, potentially uniting two of the biggest European market operators and creating a new giant in an industry that has rapidly consolidated.

“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 two said in a joint regulatory statement.

In the last decade, numerous market operators have pursued ever-bigger scale through mergers. Both of the big, old names in American exchanges, the N.Y.S.E. and the Nasdaq, are the products of mergers themselves: the Big Board with Euronext and then the IntercontinentalExchange, and the Nasdaq with the OMX Group of Sweden.

Under the terms of the proposed merger disclosed on Tuesday, shareholders in the LS.E. would receive 0.4421 of a new share in the combined company for every L.S.E. share they own. Their counterparts at Deutsche Börse would receive one share of the new company for each of their shares, giving the 54.4 percent of the united market operator over all.

The new company’s board would be evenly divided between directors of each of the two companies.

Shares of the L.S.E. were up nearly 17 percent in Tuesday trading in London. In Frankfurt, shares of Deutsche Börse were up 7.4 percent.

The two are no strangers to deal-making. Even after Deutsche Börse failed to merge with the N.Y.S.E. — clearing the path for the Big Board to sell itself to the IntercontinentalExchange — it has struck a number of acquisitions.

The L.S.E. has played both acquirer and potential target, not least with Deutsche Börse itself. The two discussed plans to merge in 2000, though no deal emerged, and then four years later, Deutsche Börse made an unsuccessful bid for its London-based rival.

Other exchange operators, including OMX and Nasdaq, also made bids for the L.S.E. that the British firm rejected.

Instead, the L.S.E. has struck acquisitions like those of Borsa Italiana of Milan and Russell Investments, the owner of the Russell stock market indexes. The London exchange also sought to acquire TMX, the parent of the Toronto stock exchange, though that deal was scuttled by investors in the Canadian firm.

Robey Warshaw is advising the L.S.E., while Perella Weinberg Partners is advising Deutsche Börse.

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