Deutsche Boerse Nears Merger With LSE as Brexit Vote Loomsby
Kengeter to become CEO of combined group if deal completes
Boards create referendum committee to advise on Brexit risks
Deutsche Boerse AG’s merger with London Stock Exchange Group Plc is getting closer to an agreement as the companies confirmed key appointments should the deal take place.
The chief executive officer role at the combined company will go to Deutsche Boerse CEO Carsten Kengeter, while LSE boss Xavier Rolet will step down, according to a statement on Friday. The Anglo-German titan would be a public limited company in London, with joint headquarters and listings in the U.K. capital and Frankfurt.
LSE Chairman Donald Brydon would keep that role at the combined exchange operator, while Deutsche Boerse’s Joachim Faber would become deputy chairman and senior independent director. LSE’s chief financial officer David Warren will hold the same position in the new exchange should the deal be completed.
The companies, which described the transaction as an “industry-defining combination,” are moving closer to a deal that has eluded them twice in the past. Discussions about the tie-up continue with regulators, but officials could still block the deal.
The conversations are complicated by the potential for Britain to exit the European Union -- a Brexit -- after it holds a referendum on continued membership of the 28-nation club. The companies’ boards have created a committee to advise on the ramifications of a Brexit, though they say the deal will proceed regardless of how Britons vote on June 23.
“LSEG and Deutsche Boerse believe that the potential merger would be well positioned to serve global customers irrespective of the outcome of the vote by the United Kingdom electorate on the European Union membership,” the companies said.
Rolet’s legacy will include an industry-leading share rally since becoming CEO in May 2009.
“Xavier has been the architect of LSEG’s considerable value creation and has offered to retire in order to ensure the successful creation of the new group,” Brydon said in the statement. “He has agreed to remain available to the new board to assist in any way to ensure an effective transition.”
A deal would create a global player worth at least 20 billion pounds ($28 billion), giving customers a one-stop shop for primary markets in London, Frankfurt and Milan, as well as access to a pan-European stock venue called Turquoise. The companies describe it as a “liquidity bridge.” The transaction would also gather the Euro Stoxx 50 Index, the most valuable equity benchmark in Europe, and FTSE Russell’s portfolio of indexes under the same roof.
Regulations that have increased collateral requirements provide a further rationale for the merger. Deutsche Boerse has a sizable futures clearing business, while LSE is majority owner of LCH.Clearnet, the world’s biggest clearer of swaps. Bringing the clearinghouses together would allow customers to reduce their overall collateral, saving them money. The process is called cross-margining.