Activist Hedge Fund TCI Boosts Its Investment in M&A Target LSE

  • TCI helped scuttle a prior bid from Deutsche Boerse for LSE
  • Fund now owns a 4.25% stake in the British exchange company

Activist investor TCI Fund Management increased its stake in London Stock Exchange Group Plc, the British market operator in a planned merger with Deutsche Boerse AG, prompting speculation the hedge fund may push for sweeter deal terms.

The hedge fund owns 4.25 percent of LSE, according to a filing Friday. That makes it LSE’s sixth-largest shareholder, according to data compiled by Bloomberg. The shares rose 1 percent, the biggest gain in two weeks. TCI revealed on Feb. 25 that it had opened a position in the stock.

Though LSE and Deutsche Boerse agreed to combine earlier this year, it’s not the first time they’ve tried to link up -- and TCI took a stand during one of their prior negotiations. TCI and another activist fund forced Deutsche Boerse to drop a 2005 offer to purchase LSE and ousted the German company’s chairman and chief executive officer.

But this time, some see TCI’s move in a more positive light. People familiar with the matter in March said that LSE shareholders have complained that they’re getting shortchanged by Deutsche Boerse. Beefed-up activist involvement might swing things more in their favor.

“This might be the precursor for a request for better terms, or simply an endorsement of the current strategy,” said Steve Schlemmer, who specializes in European merger arbitrage at Churchill Capital UK Ltd. in London. “They have a long and enviable track record, both as activists and as value-oriented shareholders.”

A TCI spokesman declined to comment.

Should the deal go through, it would create the biggest exchange company in terms of revenue. The LSE has said that their deal documents are expected to be published in June.

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