Politicians in Frankfurt appear determined to accept nothing but the headquarters of the combined London Stock Exchange and Deutsche Boerse, with an influential minister making clear he is not interested in compromise.
“We are not in a bazaar,” Thomas Schaefer told City A.M. when asked whether there was anything the exchanges could offer to the state of Hesse other than the legal HQ, which is due to be in London.
He also suggested that executives from the company know this would be the best option for the combined entity but that they do not want to acknowledge that “Brexit has inexorable drawbacks for Great Britain”.
There are two main hurdles facing the London Stock Exchange and Deutsche Boerse as they seek to complete their £21bn merger: the European Commission and the state of Hesse, which has the authority to veto the deal. (Though the issue is also heating up in the UK.)
Politicians in the area, who are not themselves directly responsible for approving the deal, have been cranking up the pressure on the companies to move the legal HQ from London, where it will be under the terms of the deal, to Frankfurt. And sources close to the deal have told City A.M. they are exploring other offers that could be made to woo Hesse.
But Schaefer, who said he is in principle supportive of the deal to help the European exchanges compete on an international scale, made clear the HQ issue is all important to him.
“In my view, the location issue is of fundamental importance and significance,” he said. “Also the parties involved in London should see that, in their own best interest, it would not be a good idea to stick to the plans in their original form.
“My feeling is that the management of the London Stock Exchange has realised this but is shying away from relocating the registered office for political reasons at present according to the motto ‘what to tell my child?’.”
When considered rationally, the reasons for having the headquarters in Frankfurt are very clearly out on the table. But the actors are still caught up in national loyalty. They do not want to be the first ones to give a clearly visible sign showing that the Brexit has inexorable drawbacks for Great Britain.
Nonetheless it would be an advantage also for the LSE if the holding company of the merged stock exchange had an anchor in a stable legal framework like Germany, since, right now, nobody is able to make an exact forecast of how the general framework will look like in London after the Brexit.
The London Stock Exchange and Deutsche Boerse declined to comment.