London Stock Exchange seeks to wrap up French clearing house sale as EU regulatory battle looms for Deutsche Boerse merger

William Turvill
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Inside The London Stock Exchange
The London Stock Exchange and Deutsche Boerse agreed a £21bn merger in March (Source: Getty)

The London Stock Exchange Group is whittling down the list of candidates for the sale of its Paris-based clearing business and could be in a position to announce a deal before Christmas, City A.M. understands.

The LCH SA deal is seen as crucial to the success of the London Stock Exchange’s £21bn merger with German outfit Deutsche Boerse. It will also only be completed if the mega-merger goes through.

EU regulator the European Commission is expected to issue a so-called statement of objections to the LSE-Deutsche Boerse deal in December.

And City A.M. understands an LCH SA deal, which would seek to address anticipated competition concerns around clearing, is likely to be agreed in December or January.

Read more: JP Morgan Cazenove to oversee sale of London Stock Exchange’s clearing arm

The sale process, being handled by JP Morgan Cazenove, is understood to be at an advanced stage, with pan-European rival Euronext thought to be the frontrunner for LCH Clearnet SA.

Euronext, which owns the main stock exchanges in France, the Netherlands, Portugal and Belgium, is believed to be in pole position because it contributes around half of the revenue of LCH SA. But Euronext has made clear that it will not pay any price for the company, which has been valued at up to €500m (£430m).

The shortlist of candidates alongside Euronext is currently being cut down.

City A.M. reported last month that New York Stock Exchange-owner Intercontinental Exchange, CME Group and Nasdaq are considered to be among the suitable US candidates. The shortlist was also likely to be drawn from an international pool of companies including the Hong Kong stock exchange, the Singapore Exchange, Shanghai Stock Exchange and Moscow Exchange. Smaller European players such as Icap, Bolsa de Madrid, SIX Swiss Exchange and Euroclear are also considered potential suitors.

The London Stock Exchange and Deutsche Boerse confirmed they were in talks in February this year, marking their third attempt to merge in two decades.

Read more: Euronext weighs bid for LSE Paris business LCH SA

The terms of the deal, which included current LSE chief executive Xavier Rolet leaving and the holding company of the entity being based in London, were set out in mid-March.

The shareholders of both companies gave their backing to the merger over the summer and the LSE and Deutsche Boerse are now battling to win regulatory approval from the European Commission.

The deal is due to be completed in the first half of next year, though analysts remain doubtful it will pass regulatory hurdles.

The London Stock Exchange declined to comment.

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