Belfast Telegraph

European regulators kill off LSE's £24bn merger over monopoly fears

European regulators have killed off the London Stock Exchange Group's (LSE) £24 billion merger with Deutsche Borse, saying the deal would have forged a "de facto monopoly".

The European Commission moved to block the deal after it said the two exchanges had failed to address its competition concerns.

The move comes after the LSE rejected the commission's request last month to offload its 60% stake in the Italian trading platform MTS.

Margrethe Vestager, the EU's competition commissioner, said: "The merger between Deutsche Borse and the London Stock Exchange would have significantly reduced competition by creating a de facto monopoly in the crucial area of clearing of fixed income instruments.

"As the parties failed to offer the remedies required to address our competition concerns, the Commission has decided to prohibit the merger."

The tie-up has faced multiple hurdles since it was first announced in March last year, with Britain's Brexit vote flagged by analysts as a potential barrier that could scupper the deal.

The LSE had agreed to offload its French clearing business LCH to Euronext for 510 million euro (£434 million) to help smooth the passage of the merger.

However, further doubts were raised last month when it was revealed that Deutsche Borse boss Carsten Kengeter was under investigation by German authorities over alleged insider dealing.

It marks the third failed attempt in 17 years to create an Anglo-German exchange and came just hours before Britain began its exit from the European Union by triggering Article 50.

In a statement, the LSE said it regretted the EU Commission's decision not to wave through the deal.

"LSEG believes the proposed merger with Deutsche Borse in combination with the LCH SA remedy would have preserved credible and robust competition in all markets.

"This was an opportunity to create a world-leading market infrastructure group anchored in Europe, which would have supported Europe's 23 million SMEs and the development of a deeper Capital Markets Union."

The LSE said it disagreed with the EU Commission's findings that LCH SA could not be a " viable stand-alone competitor" without the sale of MTS.

It said its remedy, which also offered guaranteed access to the MTS feed for three years, was "clear cut, viable and addressed the commission's competition concerns".

Despite the deal collapsing, LSE said it was "confident in its prospects as a stand-alone business" and would launch a £200 million share buyback to enhance the value of the company's remaining stock.

It had planned to pay out a special divided to LSE shareholders if the deal had gone through.

The group added that it would continue to look to "inorganic and ongoing organic investment" to drive growth.

Deutsche Borse chairman Joachim Faber said the EU Commission's ruling was a "setback for Europe, the Capital Markets Union and the bridge between continental Europe and Great Britain".

"A rare opportunity to create a global market infrastructure provider based in Europe and to strengthen the global competitiveness of Europe's financial markets has been missed," he added.

Mr Kengeter said the German exchange was " well-positioned on a stand-alone basis" to compete globally.

If successful, the merger would have seen LSE boss Xavier Rolet step down, with Mr Kengeter becoming chief executive of the new company.

The combined firm would have been headquartered in London - a proposal said to have rankled German politicians.

The disintegration of the deal will fuel speculation of a takeover approach for LSE from a US suitor, fuelled by sterling's collapse versus the US dollar and the euro since the Brexit vote.

The Chicago Mercantile exchange threatened to gatecrash the LSE Deutsche Borse merger last year, while the New York Exchange, the Intercontinental Exchange (ICE), announced in March 2016 that it was preparing a possible counter-offer before pulling back on an official approach.