London Stock Exchange Group Plc provisionally agreed to pay 15 euros a share for a majority stake in LCH.Clearnet Group Ltd. as the two companies extended the deadline for takeover negotiations until Jan. 31.
The new bid comprises 14 euros in cash payable upon completion of the deal and 1 euro to be paid in September 2017, the companies said in a Regulatory News Service statement today. Europe’s oldest independent bourse originally offered 20 euros a share for as much as 60 percent of LCH.Clearnet, valuing the clearinghouse at 813 million euros ($1.07 billion).
LSE cut the bid to 14 euros a share amid concern European regulations will force LCH.Clearnet to boost capital by 300 million euros to 375 million euros, three people with knowledge of the matter said last week. The European Securities and Markets Authority has proposed that 95 percent of a clearinghouse’s cash deposits placed with financial institutions must be collateralized with debt instruments meeting certain conditions of liquidity and credit risk, LSE said in September.
“The provisionally agreed offer price is based on an assumption of a 300 million-euro capital raise,” according to today’s statement. “The price is subject to adjustment depending on the precise quantum of the capital raise which LCH.Clearnet is currently discussing with regulators.”
Clearinghouses operate as central counterparties for every buy and sell order executed by their members, who post collateral, reducing the threat from a trader’s default. They have become more attractive as regulators seek more central processing of derivatives transactions.