LSE Shareholders To Vote on Merger With Deutsche Boerse

Shareholders of the London Stock Exchange are scheduled to vote this week on the proposal to merge with German exchange Deutsche Boerse. The $27 billion deal which is said to be a merger of equals is aimed at improving cost efficiencies, reducing costs and will result in the world’s largest bourse.

The recent British vote to exit the European Union might imply changes in the terms of the agreement, but both exchanges have asserted that the deal will not be affected by the Brexit. BaFin, the German market regulator however has said that it is not possible for London to be the headquarters of the most important exchange in the EU, if London is outside the EU.

The London stock exchange had stated after the immediate aftermath of the referendum verdict that the deal would definitely go ahead. Most sources indicate that the deal will be approved by the shareholders. Deutsche Boerse shareholders would be sending in their votes by postal ballots which are expected to be finalized by July 12.

Reuters

Experts say that the deal is vulnerable to regulatory action. Although BaFin cannot veto the merger, the Deutsche Boerse might heed to its concerns. Similarly, the state of Hesse, where Deutsche Boerse is headquartered and which has veto power is likely to be concerned by the fallout of the Brexit on the deal.

A committee has already been set up by the two exchanges to study the impact of Brexit on the merger. It is headed by Joachim Faber Chairman of Deutsche Boerse who earlier said that the decision to have London as the headquarters would be reviewed after the Brexit vote.

The committee is additionally slated to discuss the economic implications of Britain leaving the EU. The new trading terms are unlikely to be discussed until the British government triggers Article 50 of the European Treaty which sets into motion the formal process of separating. It is expected that the regulators will examine the committee’s recommendation before issuing their approval. The committee findings are expected to be released in a few weeks’ time. Any consequent major changes to the deal would need additional shareholder approval.

The sharp drop in the value of pound will benefit shareholders of Deutsche Boerse and may also impact the current ownership ratio of 54:48.This is the third time that the two exchanges are attempting a merger. While the first attempt was blocked by British shareholders, the subsequent one was thwarted by a Swedish counterbid.

---