Merger of LSE & Deutsche Borse

Merger of LSE & Deutsche Borse

On 27 Feb 17, London Stock Exchange (LSE) announced that their US$ 31 billion merger with Deutsche Borse, was unlikely to be approved by the European Union (EU). The merger was announced last year, to create a giant trading powerhouse that could better compete with US rivals.

 

Is the EU creating negotiating space for BREXIT talks?

On 27 Feb 17, London Stock Exchange (LSE) announced that their US$ 31 billion merger with Deutsche Borse, was unlikely to be approved by the European Union (EU). The merger was announced last year, to create a giant trading powerhouse that could better compete with US rivals.

However, on 16 Feb 17, EU asked LSE to sell its 60% stake in MTS, a fixed-income trading platform. The sale was requested, apparently to satisfy anti-trust concerns, over the proposed merger of Europe’s two largest market operators. However, LSE has now responded that such a sale would be difficult to implement, require regulatory approval from several European governments and be detrimental to ongoing operations. The Italian Borsa (stock exchange), which since 2007, is also wholly owned by the LSE, may also need to be sold. As a result of the refusal, LSE believes that the EU is unlikely to provide clearance for the merger. This was LSE’s third attempt to merge with Deutsche Borse.

Assessment

In Mar 17, UK PM Theresa May, after obtaining Parliamentary approval, is expected to trigger Article 50 to initiate two-years of formal discussions, before UK leaves the EU. By refusing permission to merge, is the EU creating a better negotiating stance for the forthcoming BREXIT talks?

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