The planned merger between the London Stock Exchange and the Frankfurt-based Deutsche Börse is moving closer towards reality, despite concerns raised by Brexit and stock market competitors.
As of Wednesday afternoon, 53 percent of Deutsche Börse shareholders have offered to exchange their stocks for ones issued after its potential merger with the London Stock Exchange (LSE), the Frankfurt-based stock exchange announced.
This places it well on its way towards getting the 60 percent buy-in it requires to move forward with the fusion.
It has had to twice lower its hurdles, however, sinking its requirement at the start of the week from 75 percent and extending the deadline for investors to agree by two weeks, until July 26.
Many of its bigger index funds are only allowed to offer their shares after a majority of shareholders have already done so. Shares held by these funds represent about 15 percent of Deutsche Börse’s total, so it is now expected that the threshold will be quickly met.
LSE stockholders already gave their green light at the beginning of the month.
Better after Brexit
The planned merger also got a thumbs-up from Germany’s central bank, the Bundesbank, by way of its board member Andreas Dombret.
“It may sound odd at first, but such a merger makes more economic sense after Brexit,” he said at an event in Frankfurt on Wednesday. He believes it would create a vital “bridge” between the EU and the UK, while the country pulls out of the union.
Dombret is the highest-ranked German official to come out so unequivocally for the fusion, aspects of which were cast in doubt after the Brexit vote last month.
Controversy revolved around the location of the merged stock exchange’s institutions, particularly its headquarters.
Felix Hufeld, president of Germany’s financial oversight committee Bafin, spoke against basing the merged stock exchange in London.
Regulators from the German state of Hessen’s stock market oversight authority – which has to approve the deal as well – expressed similar concerns.
People close to the dealings, according to news agency Reuters, reported that Deutsche Börse was aiming for the headquarters to be located within the EU – or at least for it to be split, though experts said this would cost more than simply placing it in London.
Competition complaints
Portugal and Belgium have joined France in taking a stance against the merger, claiming that it would compromise competition between Europe’s stock markets. Both countries recently sent letters of complaint to European Commissioner for Competition Margrethe Vestager.
“Such a concentration of trade and trade-related services poses a clear threat to competition,” wrote Portuguese Finance Minister Mario Centeno. The merger, he said, “endangers the viability of several European stock exchanges.”
Belgian Finance Minister Johan Van Overtveldt wrote that small and mid-sized companies in his country would suffer from reduced access to capital markets that would result from the merger. “A very dominant player” would emerge from it and “draw liquidity away from smaller markets such as Euronext Brussels.”
The stock markets in Lisbon and Brussels, as well as in Paris and Amsterdam, belong to the stock exchange company Euronext.
The EU will also have to grant its approval for the merger to go through.
jtm/mrk (dpa, Reuters)
