Deutsche Boerse takeover of London Stock Exchange fails

EU Commission says $14bn deal would harm competition by creating de facto monopoly

European Competition Commissioner Margrethe Vestager.  Photograph: Reuters

European Competition Commissioner Margrethe Vestager. Photograph: Reuters

 

European Union regulators dealt a final blow to Deutsche Boerse’s planned takeover of London Stock Exchange Group, a symbolic block on EU-UK integration on the same day Britain formally serves notice of its decision to quit the EU.

The $14 billion deal to create Europe’s biggest exchange would have harmed competition in the soon-to-be 27-nation EU by creating a de facto monopoly for clearing bonds and repurchase agreements, the European Commission said in an emailed statement on Wednesday.

The decision, flagged last month by LSE, thwarts Deutsche Boerse’s expansion just five years after the EU also banned a proposed tie-up with NYSE Euronext.

“As the parties failed to offer the remedies required to address our competition concerns, the commission has decided to prohibit the merger,” said Margrethe Vestager, the EU’s antitrust commissioner.

EU regulators have become increasingly tough on big deals, demanding weighty concessions to eliminate overlapping businesses amid concerns that a combined firm could dominate an industry and increase prices. While this is the second time that Vestager has formally blocked a merger, several transactions have been ditched over antitrust opposition.

Brexit

Opposition to the Frankfurt-based exchange’s merger plans went up a gear after the UK voted to leave the EU last year.

German concerns over moving the combined firm’s headquarters to London added to political riptides over clearing euro trades outside the euro area.

LSE signalled last month that it didn’t expect to win EU antitrust approval, saying the European Commission’s demand that it sell its MTS unit, a trading platform in Italy for government bonds, was impossible. Failing to sell MTS was crucial because it undermined the viability of LSE’s offer to sell its French clearing unit, the EU said.

“It is the responsibility of the parties to address competition concerns either by rebutting them or by proposing adequate remedies,” the EU said in the statement. “To be effective, remedies have to address all of the commission’s competition concerns and be viable long-term.”

While LSE cited impossible regulatory demands, people familiar with the discussions say that obscured other hurdles. These include a stalemate over the location of the headquarters, which was magnified by the Brexit vote. That decision exposed key parts of the business, like euro clearing, to political forces, said the people who asked not to be named because the talks are private.

Wednesday’s formal veto means LSE probably won’t follow through on the sale of its French clearinghouse, which it had offered to sell to win over regulators. Euronext still wants to acquire the unit.

The EU block on a UK-German exchange transaction comes a year after Vestager stopped the merger plans of two UK mobile phone operators.

Deutsche Boerse’s last attempt to merge with another exchange, NYSE Euronext, fell by the wayside after regulators said it would have created a quasi-monopoly for European financial derivatives traded globally on exchanges.