LSE Said to Agree on Sale of Clearing Unit as Soon as This Weekby
French clearinghouse could be valued at 500 million euros
Divestment is an attempt to assuage European merger watchdogs
London Stock Exchange Group Plc may announce an agreement to sell its French clearing unit to Euronext NV as soon as this week, according to people familiar with the discussions, as part of the exchange operator’s plan to win over competition watchdogs.
The deal, slowed by a now-resolved disagreement over some terms, could be announced within days, the people said, asking not to be named because the discussions are private. The sale of LCH.Clearnet SA could fetch at least 500 million euros ($554 million), people familiar with the matter said last month. Euronext said on Dec. 20 that it had entered into exclusive talks to buy the clearing arm.
Spokesmen for Euronext and LSE declined to comment.
The sale is an attempt to assuage competition regulators’ concerns about Deutsche Boerse AG’s $12 billion takeover of the London-based exchange group. The deal would create Europe’s dominant operator in everything from indexes to stock markets and clearing, which is a key rationale for the deal and the most contentious part of the transaction.
LCH’s French unit clears stocks, fixed-income, listed-derivatives and credit default swaps, and Euronext is among its most important customers. The contract between Euronext and LCH expires at the end of 2018. The business also attracted interest from Nasdaq Inc. and CME Group Inc., Bloomberg News reported last month.
Clearinghouses collect collateral from traders and monitor risks to ensure a default doesn’t spiral out of control. Regulators see them as a way to help prevent a repeat of the 2008 crisis, and they’ve since become more embedded in the financial system.
Although Euronext’s purchase would be conditional on Deutsche Boerse successfully acquiring LSE, a sale would bring to an end a 13-year combination with its U.K. counterpart. The timing of the potential deal was earlier reported by the Financial Times.
The French clearinghouse had 36.2 million euros of profit in 2015, compared with about 33 million euros when it combined with LCH 13 years ago. The 2003 deal valued it at about 600 million euros.
The European Union has a March 13 deadline to rule on the Deutsche Boerse deal. The companies said Dec. 14 that they received formal objections from regulators to their planned tie-up.