The City is at risk of losing, or sharing, the merged headquarters of the London Stock Exchange and Deutsche Boerse in the wake of Brexit, City A.M. understands.
Executives at the exchanges are scrambling to reach an agreement over the location of their post-merger base, with pressure from Germany for the merged entity to have an EU-based HQ.
Both sides had pledged that the joint company’s HQ would remain in London as a condition of the deal.
However, City A.M. understands it is now possible – in the event of a full Brexit – that the City could become one of two “joint headquarters”, potentially sharing the status with a European counterpart, such as Amsterdam. Alternatively, there could be one base outside of the UK.
Sources close to the deal have told City A.M. the organisations have reached an understanding, through a “meeting of minds” at the highest levels of the organisations”, that the combined group will need an EU HQ as they seek regulatory approval for the deal.
The HQ issue will be considered by the deal’s Referendum Committee and no decisions have yet been made. But sources suggested it could consider the dual-headquartered option.
The exchanges said in a joint statement: “We refer back to our previous statements on this matter – those still stand. The terms of our deal – which are binding – remain unchanged.”
London Stock Exchange shareholders voted to approve the deal on Monday, and Deutsche Boerse investors have until next week to do the same.
The HQ movements come after the head of Germany’s financial market regulator, Bafin, last week said the organisation could not be based in London – and therefore outside of the EU – after Brexit. Sources told City A.M. then that the location of the joint HQ would be debated at a senior level.
And on Tuesday, Deutsche Boerse issued a statement making clear the Referendum Committee will make recommendations seeking to “meet all regulatory requirements to secure” the deal.
Jonathan Goslin, a Numis analyst covering the deal, told City A.M. a move by the companies to have two headquarters would be unsurprising and an attempt to “keep everybody happy”.
Goslin said he would be “very, very surprised if UK politicians and regulators would be willing to cede such an important hub to the EU” by giving up the London HQ.
But he also suggested shareholders in the stock exchanges might not be happy with the proposal of having two headquarters.
“If you’re trying to appease politicians, and you’re saying ‘we’re going to have joint headquarters’, that’s fine. But... from the shareholders point of view that’s a duplication of costs,” he said.
“But if it’s something that will make the deal go through, then it’s worth reviewing.”