After winning shareholder support, London Stock Exchange and Deutsche Boerse prepare for the real challenge

 
William Turvill
Follow William
GERMANY-FINANCE-STOCK-BRITAIN-MERGER
The London Stock Exchange and Deutsche Boerse agreed a £21bn merger in March (Source: Getty)

The London Stock Exchange and Deutsche Boerse are preparing for a regulatory battle to force through their £21bn merger after winning shareholder support.

Analysts covering the deal remain doubtful that the tie-up will pass the necessary hurdles, with particular scrutiny expected from the European Commission and the State of Hesse, where Deutsche Boerse is based.

The German exchange announced this week that more than 60 per cent of shares had been tendered in support of the deal.

Read more: Analysts doubt stock exchange merger will go through after Brexit vote

“In all honesty, I didn’t really view this as a hurdle,” Numis analyst Jonathan Goslin told City A.M. “I was rather surprised that it was so close. I thought they would have got more support than that. The main [hurdle] is going to be around competition authorities.”

He believes obtaining the support of the authorities of Hesse will be the biggest challenge.

Elsewhere, Exane BNP Paribas analysts Gregory Simpson and Arnaud Giblat indicated this week that the support of Deutsche Boerse shareholders represents “nothing materially new on the deal”.

They said in a note: “We remain of the view that the deal is most likely to be blocked.”

Deutsche Boerse yesterday indicated to analysts that the exchange is anticipating an in-depth, phase two investigation from EU competition authorities.

The governments of France, Belgium, Portugal and, according to rival exchange Euronext, the Netherlands have all expressed concerns about the LSE-Deutsche Boerse tie-up.

Read more: London Stock Exchange chief: Brexit impact would be "substantial"

Deutsche Boerse today announced 63.65 per cent of shares had been tendered in support of the merger.

Earlier this month, it lowered the shareholder backing threshold from 75 per cent to 60 per cent.

Deutsche Boerse shareholders who have yet to tender their shares have another two weeks to do so now that the deadline has passed and the necessary level of support has been received.

The Frankfurt-based exchange’s chief financial officer Gregor Pottmeyer said in a statement:

We are very pleased that the majority of our shareholders believe in the compelling strategic rationale of our proposed merger. The merger will unlock significant value generation potential and accelerate our growth strategy.

Shareholders who have not tendered their shares so far will have the opportunity to do so in the additional acceptance period, which will start on 30 July and last until 12 August. We are confident that we will see significantly higher acceptance levels at the end of the two additional weeks.

Related articles