The London Stock Exchange Group said a potential merger with Deutsche Boerse would be “compelling” as potential rival bidders line-up for the British company which reported a jump in profits on Friday.

The group, which owns Borsa Italiana and the London Stock Exchange, said detailed discussions with Deutsche Boerse were ongoing over a deal to create a pan-European trading house with substantial revenue and cost benefits.

LSE and Deutsche Boerse said last week they were in merger talks, although New York Stock Exchange owner Intercontinental Exchange has raised the prospect of a bidding war by saying it was considering making a counter-offer.

Deutsche Boerse and the London Stock Exchange are making a third attempt at creating a European trading powerhouse to take on US rivals encroaching on their turf.

Nearly 16 years after their first merger attempt, the London and Frankfurt exchanges are discussing an all-share deal giving Deutsche Boerse shareholders a 54.4 per cent stake and LSE shareholders 45.6 per cent of a new company.

Similar scale

It would combine the LSE’s share-trading operation with the derivatives trading of Deutsche Boerse’s Eurex in a group worth almost $30 billion (€27 billion). It would give the companies similar scale to US exchange ICE, which has taken a huge slice of the European derivatives markets.

LSE chief executive Xavier Rolet promoted the potential tie-up as a true “merger of equals”, with a British-based holding company and a unitary board. But Mr Rolet, who will step aside should the deal with Deutsche Boerse succeed, would not comment on any prospective interest from ICE.

The LSE reported a 31 per cent increase in full-year adjusted pretax profit to £643.4 million (€830 million) from £491.7 million a year earlier, just shy of analysts expectations.

“A small miss on results, combined with a lack of material new information on the deal is likely to weigh slightly on the shares this morning,” said analysts at Exane BNP Paribas.