LSE-Deutsche Boerse merger seen set to fail

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The planned merger between the London Stock Exchange (LSE) and Germany’s Deutsche Boerse looks to be heading for collapse.

The 29 billion euro deal is intended to created Europe’s biggest financial exchange but the Brexit vote ratcheted up opposition and now – in a surprise move – the London Stock Exchange has said it will not sell one of its holdings as European regulators had demanded.

Market Analyst Ken Odeluga with City Index said: “The amount of conditions they have needed to make have been mounting up to a stage where they are beginning to look at the deal as untenable. The essential straw that breaks the camel’s back is an additional demand by the competition regulators in Europe about a bond trading platform based in Italy.”

The LSE said the request was “disproportionate”, also that it would struggle to sell the bond trading platform MTS and that such a sale would be detrimental to its business.

The European Commission is expected to reject the merger on competition grounds with its decision due by the end of the month.

The failure of the deal had been feared by many involved, amid growing calls from German politicians that the headquarters be shifted from London to Frankfurt because of Brexit – a concession the LSE did not want to make.

Latest attempt of many

This is the latest in a series of doomed efforts at dealmaking by stock exchanges, highlighting the perils for any new potential buyer, such as US exchange ICE.

There had already been five attempts, three public and two informal, to combine the London and Frankfurt bourses during the past decade, while the EU blocked a $17 billion tie-up between what was then NYSE Euronext and Deutsche Boerse in 2012.

LSE says Deutsche Boerse deal unlikely after year-long attempt https://t.co/7h8HPuEGyY via johndetrixhe</a> <a href="https://t.co/vdKlAUy8e3">pic.twitter.com/vdKlAUy8e3</a></p>&mdash; Bloomberg Markets (markets) February 27, 2017