The European Union has stopped the London Stock Exchange from entering a £21bn deal with the German stock exchange, the Deutsche Boerse.
EU Halts London Stock Exchange-Deutsche Boerse Merger
In a ruling over the merger between the London Stock Exchange and the Deutsche Boerse, regulators at the European Commission said in a statement that the deal was unacceptable, as it would create a monopoly in the region’s financial sector.
The deal would have seen two of the biggest stock exchanges in Europe unify.
In a statement, the London Stock Exchange Group expressed its regret over the decision by the commission and said that the merger had the aim of creating a world-class financial markets company.
Brexit had already thrown the deal into disarray and it is unsurprising that the commission has thrown it out the window.
This will be the third failed attempt by the LSE to merge with its German counterpart.
Plans for the two stock exchanges to come together began almost one year ago with the last two attempts being in 2000 and 2004.
The merger was sabotaged by concerns over the headquarters of the new entity and the dynamics that would be involved in combining liquidity between the two exchanges.
After the UK voted to exit the EU, these concerns came to the forefront once more.
According to Neil Wilson of ETX Capital, Brexit was responsible for effectively killing the merger deal nine months ago.
He added, “It is fitting that the EU competition commissioner Margrethe Vestager halted the merger just hours before the UK triggered Article 50.”
Last month, the LSE expressed doubts that the EU commission would approve the deal given that there were concerns that the merger would impede on competition.
The firm stated, on Wednesday, “This was an opportunity to create a world class financial firm in Europe, which would have benefitted the region’s 23 million SMEs.”
Since 2000, the LSE has seen many attempts to take it over.
Analysts posit that this most recent fail by Deutsche Boers might encourage further attempts especially from the US to take over the UK stock exchange.
However, the UK has put in place national interest regulations that would make it difficult to take over the LSE.
The commission also expressed concerns over how fixed income products and bonds would be cleared if the two firms were to combine.
The LSE also runs the Italian stock exchange and maintains a chain of businesses across the region.
The UK stock exchange had proposed to sell its clearinghouse in France to eliminate the concerns expressed by the commission.
However, the commission said this move was not sufficient.
Margrethe Vestager said, ‘The economy in Europe is dependent on financial markets that function well.”
She added, “This is not just a requirement for banks. The entire economy benefits when businesses can competitively raise money on the financial markets.”
The commission had required the LSE to sell its 60% stake in the fixed income-trading platform, the MTS. However, the LSE declined, saying such a requirement was unprecedented.
Following the news, shares in LSE climbed more than 3% and close to 2% in Deutsche Boerse.