Shares in London Stock Exchange crashed this afternoon 

Shares in London Stock Exchange Group (LON:LSE) crashed this afternoon as the owner of the New York stock exchange pulled out of a potential rival bid.

It now paves the way for the potential £21bn merger of LSE and the German Deutsche Börse AG to go ahead.

Atlanta headquartered Intercontinental Exchange (ICE), which owns NYSE, said on Wednesday it was not considering making an offer for LSEG, which is the London’s firm’s parent company, after first admitting it may make an attempt in March this year.

In a brief statement, ICE told investors: “Following due diligence on the information made available, ICE determined that there was insufficient engagement to confirm the potential market and shareholder benefits of a strategic combination.

“Therefore, ICE has confirmed that it has no current intention to make an offer for LSEG.”

ICE could still however make an offer for LSEG within the next six months, provided it has approval from the UK takeover panel  or if the London/German merger collapses or another bidder comes in for LSE.

LSE shares sank 6.55% this afternoon to 2,513p.

The world’s biggest trading-to-clearing exchange group

A deal with ICE would have created the world’s biggest trading-to-clearing exchange group but there were concerns about whether it would be approved by regulators or  how attractive it would be in the event of a Brexit vote.

In March, LSE and  Deutsche Börse said the two exchanges in Frankfurt and London, with market capitalisations of €14.7bn and £10.1bn respectively, would come together in a deal  to create a “leading Europe-based global markets infrastructure group”.

Analysts said the deal had merits, bringing the FTSE, Russell and Stoxx indices all under one roof and gaining from combining major clearing houses of LCH.Clearnet and Eurex Clearing and high-revenue derivatives businesses.

But they said planned savings from the deal of €450mln a year by the third year after completion may not be enough to ward off rivals.

They also pointed to potential competition concerns and possible regulatory problems if the UK quits the EU.

Deutsche Börse shareholders would own 54.4% of the new company and LSE investors would hold 45.6%.

They expect the tie-up to save €450mln per year by the third year after the completion of the deal.

The savings are expected to come through technology-derived efficiency by removing duplication of head office activities.

The combined group will have a balanced governance structure and maintain its headquarters in Frankfurt and London.

LSE chief executive Xavier Rolet will step down and the chief executive of Deutsche Börse, Carsten Kengeter, will become chief executive of the combined group.

Source: Proactive Investor

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