LSE-Deutsche Boerse merger hits the curb due to European Commission’ requirement

Maria Nikolova

LSEG Board has concluded that it could not commit to the divestment of MTS and that the European Commission is unlikely to provide clearance for the proposed deal with Deutsche Boerse.

The planned merger between London Stock Exchange Group Plc (LON:LSE) and Deutsche Boerse AG (ETR:DB1) has hit a regulatory hurdle, due to a requirement by the European Commission to both parties to commit to the divestment of LSEG’s stake in MTS S.p.A (MTS), a major regulated 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, LSEG explains that it regards the required MTS remedy as disproportionate but it tested thoroughly the feasibility and implications of this remedy. However, after further discussions, the European Commission has requested that the London Stock Exchange and Deutsche Boerse formally submit a remedy proposal for the divestment of LSEG’s majority stake in MTS by 12pm (CET) on Monday, February 27, 2017.

The London Stock Exchange notes that MTS is not on its own a major contributor to LSEG revenues, but adds that LSEG’s Italian businesses account for a big part of Group revenues and profitability. In addition, 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 such as the UK, Belgium, France and the USA.

After discussions with Italian authorities about the European Commission’s requirements and, taking into account prior discussions between the principals and Italian authorities regarding LSEG’s Italian businesses in the context of the planned deal, “the LSEG Board believes that it is highly unlikely that a sale of MTS could be satisfactorily achieved, even if LSEG were to give the commitment”. Also, the LSEG Board states that the offer of such a remedy would put under risk LSEG’s important relationships with these regulators and will hurt LSEG’s businesses in Italy and the Combined Group, if the Merger were to complete.

Referring to these factors and the interests of its shareholders, the LSEG Board says it could not commit to the divestment of MTS. LSEG will therefore not be submitting a remedy proposal with respect to MTS.

LSEG believes that the Commission is unlikely to provide clearance for the Merger.

Nevertheless, LSEG says it will keep seeking to implement the merger.

In addition to European Commission clearance, the proposed deal is conditional on regulatory clearances from Italian regulators and all relevant regulators including the Bank of England, FCA, BaFin and the Hessian Exchange Supervisory Authority (HESA), as well as all other regulators and authorities in countries in which LSEG operates.

Read this next

Digital Assets

Binance upgrades Bahrain license to offer full-suite of crypto services

The Central Bank of Bahrain (CBB) has granted Binance its Category 4 license as a fully-fledged crypto-asset service provider (CASP).

Digital Assets

BitMEX spot exchange hits $24 million in daily volume

The newly-launched spot market of crypto exchange BitMEX reported a record of $24 million in 24-hour trade activity on May 25.

Retail FX

Financial Commission certifies offering of trade copier 4X Solutions

The Financial Commission, an independent self-regulatory compliance specialist for the financial services industry, has certified the trading technology offered by trade copier 4X Solutions.

Industry News, Inside View

LIVE from Devexperts webinar for brokers on Fractional Trading

Finance Feeds is providing live coverage of the event that aims to help brokers discover fractional shares as a key tool for a successful brokerage business in today’s trading industry.

Industry News, Retail FX

ASIC celebrates retail ban on binary options as 68% of wholesale clients lose money

In the 13 months before the ban, between 74% and 77% of active retail clients lost money trading binary options. The product intervention order does not apply to wholesale clients.

Crypto Insider

Investing in crypto: how to stay away from weak players

The main reason behind the hacks of crypto exchanges is weak key management. For example, all 4 hacks that took place in 2021 were caused by the ability of hackers to obtain access to hot wallets. 

Retail FX

Vantage launches swap-free gold XAUUSD trades for all clients until end of July

“As the greenback continues to strengthen, we want to support traders who remain bullish on gold or seek short term trading opportunities amid the volatility”

Industry News

Broadridge launches ESG reporting solution ahead of European regulation SFDR

The Broadridge managed solution for EET adds to existing Broadridge services, including European PRIIPs Template, European MiFID Template, Solvency II Tripartite Template and many more across the European jurisdictions.

Industry News

iCapital to acquire embedded structured investment platform SIMON

SIMON’s platform, SPECTRUM, is a multi-dimensional allocation analysis and portfolio construction tool designed to evaluate how structured investments and/or annuities may fit into a portfolio.