The London Stock Exchange has expressed concerns that its merger with the Deutsche Boerse may not happen if the European Commission failed to approve it.
London Stock Exchange and Deutsche Boerse Merger Uncertain
The merger between the London Stock Exchange and the Deutsche Boerse worth £24.5bn or 29bn euro is largely seen as being under threat of collapse.
The European Commission had given an order that the LSE sell up to 60% in MTS, a fixed income-trading platform.
The LSE now says that the order by the Commission is grossly disproportionate.
It also told investors that it would have a hard time selling MTS and the sale would have adverse effects on its business.
The LSE added, “Based on the request by the commission, the LSE believes that the commission will likely not approve the merger.”
The LSE and Deutsche Boers, which are known rivals, announced last year that they would merge as equals to create an all-encompassing trading platform that would give its rivals in the US matching competition.
The two exchanges had already agreed on selling the LSE’s clearing business, LCH, to meet requirements on competition.
However, earlier this month, the commission issued a surprise order requiring the LSE to sell 60% of its stake in MTS.
The two exchanges had until Monday to present a proposal with the commission’s new demand.
The LSE said that the sale of MTS would adversely affect its business in Italy and would need several governments in Europe to approve.
In a statement Sunday night, the LSE said, “Considering all relevant factors and based on the best interests of shareholders, the LSE Board has agreed that it cannot meet the requirement to divest MTS.”
The LSE is also the owner of the Borsa Italiana based in Milan.
The exchange said it still believed in the benefits of the merger but that it would be impossible to merge with Deutsche Boerse unless the commission changed its demands.
On Sunday night, Deutsche Boerse said that together with the LSE, they would wait for the Commission to conduct further assessment and to make its final decision at the end of March.
Syed Kamall, the European Member of Parliament for London and a member of the parliament’s finance committee noted, “I think this is great news for competition; it is also good news for those who have concerns that business will be moved from London to Frankfurt through the back door.”
Following this news, shares on the London Stock Exchange fell by 3 percentage points.