Deutsche Boerse CEO Gets `Room for Maneuver' as Capital Increase Approved

Deutsche Boerse AG, Europe’s largest exchange, received shareholders’ permission to boost its capital as Chief Executive Officer Reto Francioni seeks to increase the company’s “room for maneuver.”

Shareholders approved the exchange’s request to increase its authorized capital to as much as 20 percent of total share capital from the existing 13.3 percent at the company’s annual general meeting in Frankfurt today. The operator of the Frankfurt bourse also got authorization to create an additional pool of up to 10 percent of equity capital.

“We on the executive board of Deutsche Boerse are more concerned with harnessing the capital that you have entrusted to us in a responsible, forward-looking and profit-oriented manner,” Francioni said at the AGM. “We must take advantage of opportunities to increase our value creation. A globally operating company competing at an international level does, in principle, require room for maneuver in order to be able to have realistic scenarios under potential exceptional circumstances.”

Deutsche Boerse, along with rivals NYSE Euronext, Nasdaq OMX Group Inc. and London Stock Exchange Group Plc, saw trading shrink last year following the worst financial crisis since the Great Depression, and has been cutting costs to shore up earnings. At the same time, competition has increased from multilateral trading facilities such as Chi-X Europe Ltd. and Bats Europe while Deutsche Boerse’s International Securities Exchange Holdings Inc. has lost market share.

Largest Futures Market

Deutsche Boerse owns the Frankfurt stock exchange and is part-owner of Eurex, Europe’s largest futures market, along with the Swiss exchange. Eurex bought New York-based options exchange ISE in 2007. Deutsche Boerse also owns Clearstream, the region’s No. 2 securities-settlement company, as well as Eurex Clearing.

Deutsche Boerse said at the shareholders’ meeting that the acquisition of ISE was a “right decision in the long run,” as it was a market entry for the exchange in the U.S. and it represents a growth opportunity for derivatives trading. Chief Financial Officer Gregor Pottmeyer said he expects ISE to return to growth from 2011.

“While our priority remains to grow organically, as in the past, we do not rule out external growth options, provided they create value for our customers and shareholders,” Francioni said at the AGM today.

Remuneration Plan

Deutsche Boerse’s remuneration plan for its executive board was approved by about 52 percent of shareholders at the meeting. Chairman Manfred Gentz called the result “poor” and said this was due to some misunderstandings about the plan. The board’s new remuneration is in line with the market standards, he told shareholders before the vote.

Shareholders also approved the proposed dividend for 2009 of 2.10 euros a share, which was described as “reasonable” by Francioni.

Deutsche Boerse this month said first-quarter profit fell 24 percent as the company booked a charge for job cuts. In February, the company lowered its projection for 2010 expenses to 1.25 billion euros ($1.5 billion). Profitability “is still strong,” the CEO said at the shareholders’ meeting.

In an effort to calm financial markets, German regulator BaFin last week banned naked short-selling of sovereign debt securities and some financial shares. The surprise move caused stocks around the world to drop and the euro to slide toward a four-year low against the dollar.

Francioni said political intervention caused market uncertainty and the short-selling ban was the “wrong tool.”

To contact the reporters on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net.

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