London Stock Exchange is once again discussing a merger with German Deutsche Boerse in an all-stock deal that would see a shared board between the two exchanges.
London Stock Exchange – Deutsche Boerse: An ongoing affair, hopeful merger
London Stock Exchange (LSE) has reignited talks with Germany’s Deutsche Boerse after failed attempts back in 2000, and 2004 to merge the two entities. Since the discussions of a “merger of equals” went public, LSE’s shares have gained 17%, while Boerse has seen a rise of 7%. Both LSE and Deutsche Boerse have announced that if a merger were to be successful, there would be no change in the companies’ names.
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Although neither of the companies would be changing their names they operate under, they would have a single board, consisting of an equal amount of directors from each group. LSE announced that both boards are adamant that this merger would strengthen them, creating a “leading European-based global markets infrastructure group”. The terms of the deal would mean that Deutsche Boerse would own a majority percentage of 54.4% of the merged group.
The LSE on Tuesday said, “The boards believe that the potential merger would represent a compelling opportunity for both companies to strengthen each other in an industry-defining combination, creating a leading European-based global markets infrastructure group.”
Fears of failure
Although the talks are promising, past efforts to merge the two companies have ended in failure. In 2000, LSE and Deutsche Boerse discontinued merger talks when another company wanted in on the deal, which LSE rejected. In 2004, Deutsche Boerse made a promising proposition of £1.3 billion, but nothing came from the talks.
With many viewing a merger as simply a matter of time, the two companies’ individual stocks have largely been held by investors making each comfortable walking away from talks in the past.
The two groups would combine in an all-stock deal and will likely go through on this occasion. With Britain’s role in Europe being questioned and Brits taking the to the polls on June 23 to discuss leaving the European Union (“The Brexit”), the LSE might find itself with more incentives to finalize the deal.
“It’s probably not a coincidence that you get this announcement when the future of Britain and the EU is uncertain,” said Nicolas Véron, a senior fellow at Bruegel, a research organization in Brussels. “It’s a way to develop a Pan-European dimension even in the event of a Brexit.”
Perhaps the adage that the “third time is the charm” will play out with these most recent discussions.