LSE set for fresh talks with suitors in new year

LONDON: The London Stock Exchange holds fresh meetings with its two suitors next week when Deutsche Boerse and Euronext flesh out their rival approaches to take over Europe’s biggest equity market.

Deutsche Boerse will meet with top LSE officials on Thursday and Euronext will meet with the London exchange next week, sources familiar with the situation said. Deutsche Boerse and Euronext were not available for comment, and LSE had no comment.

After a flurry of activity in the run up to Christmas, all sides took a breather until the new year as a bid war looms.

“They are just going to be carrying on with the range of issues they have been talking about,” a source familiar with Deutsche Boerse said.

On Dec. 13 Deutsche Boerse made a 530 pence per share, or 1.3 billion pound ($2.49 billion), approach to LSE, its second attempt in four years to create a dominant European stock market which would be the second largest in the world.

Euronext later indicated it was interested in a deal with LSE and since then both Continental exchanges have held talks with London.

“The discussions will be ongoing and just part of that process. We will hit the ground running on Monday,” a source familiar with Euronext said.

On Friday, LSE shares were trading at 582 pence, valuing the company at 1.48 billion.

Price one factor: Unlike in 2000 when the iX merger proposed by Deutsche Boerse and LSE collapsed amid hostility from UK brokers, this time round market participants say a deal with either Euronext or Frankfurt is likely.

However, it may not be just down to price.

“People don’t care who owns the plumbing as long as the regulation is UK,” a banking source said.

Deutsche Boerse has said UK blue-chip trading and regulation would remain under the UK’s Financial Services Authority to keep LSE officials and market participants happy.

It has also given some assurances there would still be competition in clearing and settlement services but the big banks and brokers are looking for a more cast iron guarantee of this.

As with LSE, Euronext does not control its clearing and settlement providers, unlike Deutsche Boerse.

The Financial Times said on Friday that Deutsche Boerse Chief Executive Werner Seifert is expected to discuss putting both UK and German share trading on one platform and how London market participants could be represented.

Analysts have said that Deutsche Boerse has deeper pockets and thus greater staying power in any bidding war for LSE, but expect Euronext to offer around 580 pence per share.

The Sunday Times reported on Dec. 26 that Euronext was preparing to raise 1.4 billion pounds in the debt market to fund a bid for LSE.

Euronext, which sources said on Dec. 23 was in talks with French investment bank BNP for financing a bid, has declined to comment on the report but a source familiar with the exchange said all financing options were being examined.

“Financing is not an issue,” the source said, but declined to elaborate.

Exchanges are under pressure to merge to cut trading fees for customers further.—Reuters

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