Tuesday 5 April 2016 11:31 pm

London Stock Exchange boss Xavier Rolet fires warning shot towards US rivals as merger battle heats up

The head of the London Stock Exchange has fired a warning shot towards American rivals that are threatening to gatecrash its proposed merger with the German company Deutsche Boerse.

In an explosive interview with City A.M., Xavier Rolet savages the record of US giants that have bought into the continent in recent years, and insists he does “not want to make the same mistake” as European exchanges that have succumbed to transatlantic takeovers.

His comments come just a day after it emerged that the InterContinental Exchange (ICE) – which is headquartered in Atlanta, Georgia – has lined up funding for a £10bn takeover bid of the LSE.

“I don’t want the LSE ever again to be on the receiving end of a hostile takeover… takeovers [where] you come in, you get what you want, you chuck out the rest – this is not what this is about,” Rolet says.

“I know Euronext [an exchange bought by ICE] is going around, and the French government, and some regulators [saying]: ‘Side with ICE, this way we can break up the LSE, so Euronext can buy back Borsa Italiana, can buy back Clearnet, and recreate [something].’ Look, they’ve missed [the boat] – they’ve sold out to the Americans, they have nothing left. We don’t want to make the same mistake.

“What are we going to tell the next generation of entrepreneurs? ‘The only way to fund a high growth business is to go to Nasdaq, or go to San Francisco’?”


​Rolet believes that a tie-up with Deutsche Boerse is in London’s best interests, arguing that the LSE will remain under one roof, close to the City’s array of financial services. He casts doubt over the wisdom of a highly leveraged US takeover; brushes off concerns regarding a link between London’s and Frankfurt’s clearing houses; and insists that the merger is likely to be more compliant with European regulations.

Several MPs have called for Rolet to face a grilling in front of a parliamentary committee. “If the committee wants to call us in, we’ll come in,” Rolet says. “We have very solid arguments. I don’t know why they would want to do so.”

The proposed division of shares, which would see Deutsche Boerse assume 54.4 per cent of the new company, has raised eyebrows in Westminster, but Rolet points to the international mix of shareholders in both companies. “Twenty per cent of Deutsche Boerse shareholders are British, and only 15 per cent of Deutsche Boerse’s shareholders are German,” he says, slamming accusations of a German takeover as “frankly puerile, infantile – it’s just not the way the real world works”.


Any rival offer from across the pond will be considered by Rolet and the board, but the 56-year-old Frenchman says it would “have to be superior” to the current proposal on the table – and warns that history does not paint a kind picture.

“I look at potential track records and I see not a particularly great outcome, at least in one particular case – which is that of Euronext,” Rolet says.

“The bits that interested the US acquirer were really LIFFE, and not very much the equity platforms – they chucked them out, sold them.

“[Former Euronext boss Jean-Francois] Theodore had a strategy of global consolidation. But after he sold to the Americans, basically wind the clock forward a few years, look what’s left – nothing. It is a sub-sized platform… It is really not a success story.”


Concerns have been raised about the future of clearing houses under the proposed merger between the London and Frankfurt exchanges. Rolet insists that, far from causing a potential clash with regulators, the plans put LSE and Deutsche Boerse are in line with European thinking on clearing – an increasingly crucial part of the post financial crisis trading ecosystem.

The European Securities and Markets Authority (ESMA) said yesterday that new rules could come in from 2018, promoting open access systems that have been supported by Rolet but opposed by American exchanges.

“Open access is not about co-mingling your clearing houses,” Rolet says. “It is absolutely not. And I know where that propaganda is coming from. It’s coming from America.”

And the LSE boss adds: “When I look at the deal that’s present here [with Deutsche Boerse]… it’s not just that it meets the systemic test, it is compliant with European law.

“Which, by the way, you will recall companies – like the companies saying they may have an interest in us –publicly wrote that they were against. Who signed the letters that were against open access in Europe? ICE, LME, Euronext – effectively several ICE companies – so some of these companies have basically made their position clear: they didn’t like the open access model.”

Rolet constantly stresses the benefit that he believes London will derive from the merger with Deutsche Boerse. “I think London has advantages that make it a unique city. We wouldn’t have fought hard on that particular deal if we hadn’t believed that the things were secured,” he says.

“I love this company and I think this is the right deal.”