London Stock Exchange reiterates commitment to merge with Deutsche Boerse

Maria Nikolova

LSE awaits the outcome of the European Commission Phase II process on or before April 3, 2017.

London Stock Exchange Group Plc (LON:LSE) has today reiterated its commitment to completing the planned merger with Deutsche Boerse AG (ETR:DB1) in the face of the regulatory hurdles that emerged just a few days ago, as the European Commission imposed new requirements for finalizing the deal.

Today, LSEG noted that the proposed merger with Deutsche Boerse had already received formal approval from both sets of shareholders and that the next milestone is poised to be the outcome of European Commission Phase II process on or before April 3, 2017.

The problems stem from a requirement by the Commission to both parties to commit to the divestment of LSEG’s stake in MTS S.p.A (MTS), an electronic trading platform for European wholesale Government Bonds and other fixed income securities. It is a systemically important regulated business in Italy.

In an announcement dated February 26, 2017, the London Stock Exchange noted that MTS is not on its own a major contributor to LSEG revenues, but added that LSEG’s Italian businesses account for a substantial part of Group revenues and profitability. Also, any change of control of MTS would require the approval of the Italian authorities and would lead to parallel regulatory approval processes in other jurisdictions including the UK, Belgium, France and the USA.

The LSEG Board said in that announcement that it could not commit to the divestment of MTS. It stated that it believes that the Commission is unlikely to provide clearance for the Merger.

Today’s regulatory filing was more formal and did not feature such sceptic inferences regarding the merger.

Let’s mention something on the “numbers” side.

As a part of the proposed merger with Deutsche Boerse, LSEG shareholders are set to receive a special dividend of 58.2 pence per share. The payment of this special dividend, however, is contingent on completion of the deal. If the merger gets completed, the special dividend will be paid to LSEG shareholders on the register at the earlier of June 30, 2017 and close of business on the date prior to closing.

Also, LSEG said it had commitments of £54 million for professional fees relating to the proposed merger with Deutsche Boerse. These amounts are also payable contingent on the successful completion of the deal.

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