Regions

Frankfurt and London Stock Exchange Has Reached a Merger Agreement

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March 17
6:54 AM 2016

Deutsche Boerse AG and London Stock Exchange Group Plc (LSEG) has agreed to combine their trading operation. The merger between Frankfurt and London Stock Exchange is expected to cut £354 million ($499 million) annual cost for both companies.

After a very long discussion for 16 years and two merger attempts, London Stock Exchange (LSE) and Frankfurt-based Deutsche Boerse has reached an agreement on Wednesday to merge the company. Current Chairman of LSEG Donald Brydon will become Chairman of the new company, while Deutsche Boerse CEO Carsten Kengeter will be CEO of the new company.

"The combination will offer significant value creation potential," said a statement from Deutsche Boerse as quoted by Huffington Post. The newly formed company will be domiciled in Britain with FTSE 100 as its primary listing. It will also have a home in Frankfurt Stock Exchange with corporate headquarter in both London and Frankfurt.

The Guardian reported with the merger, Deutsche Börse shareholders will own 54.4% of the new company, while shareholders of LSE will own the remaining share of 45.6%. Both LSE and Deutsche Boerse have agreed in a $30 billion merger deal.

Deutsche Boerse CEO Carsten Kengeter said Bundesbank the German's central bank and European Central Bank will support the merger, as it will boost Frankfurt to be financial center. CEO Kengeter told Reuters, "With this transaction Deutsche Boerse is halting its decline in market share that has been on the cards for a number of years."

The successful merger between LSE and Deutsche Boerse will create the third world-largest exchange operator in terms of stock market value, and bring Europe to a competitive stance with United States and Asia.

One issue which put the deal in question is the referendum in UK regarding possibility to exit the European Union bloc in June. Another issue significant issue is the regulatory approval as a lawyer at Cavendish Corporate Finance Peter Gray said "The major test lies in the regulatory hurdle which, combined with added scrutiny in the context of Brexit, places the onus on the two companies to make a compelling case for the deal over the coming months."

Previously, European Union regulators has blocked the merger between NYSE Euronext and Deutsche Boerse in 2012. European financial regulator was fear the merger will create a monopoly in European exchange-traded derivatives.

London Stock Exchange Group was established in 2007 as a merger between London Stock Exchange and Milan stock exchange Borsa Italiana. While Deutsche Boerse was founded in 1992 and operates Frankfurt Stock Exchange. Since 2007, Deutsche Boerse also provides a joint European derivative trading platform with Zurich-based SIX Swiss Exchange.

The merger between London Stock Exchange (LSE) and Deutsche Boerse will create a new European trading powerhouse. On Wednesday, both parties has reached agreement to merge their trading operations in a $30 billion deal.

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