London Stock Exchange agrees £21bn merger

The London Stock Exchange Group (LSE) and Germany’s Deutsche Boerse have agreed terms for a “merger of equals”.

The two companies this morning revealed the terms of the £21bn deal, with both groups recommending an all-share merger that will see LSE shareholders owning 45.6 per cent of the combined group and Deutsche Borse getting 54.4 per cent.

Rival US exchange group Intercontinental Exchange (ICE) also showed interest in acquiring the stock exchange, raising the possibility that it could swoop in with an offer.

The tie-up between the two will create one of the largest exchange companies in the world and aims to cut costs by £354m a year over three years.

The groups said detailed plans had not been drawn up and that the impact on employees could not be calculated yet.

The Frankfurt-based exchange will buy LSE through a new company called UK TopCo, which will pay tax in the UK but will be listed in London and Frankfurt. Deutsche Börse and LSE will be subsidiaries of the new company, which will combine LSE’s share trading operations with Deutsche Börse’s strong derivatives dealing business.

The LSE chairman Donald Brydon will chair the board and Carsten Kengeter, Deutsche Börse’s chief executive, will have the same job after the takeover. Xavier Rolet, LSE’s chief executive, will step down but he will work as an adviser to the chairman and deputy chairman Joachim Faber for up to a year.

Mr Rolet said the two firms were “creating an industry-defining combination”.

He told analysts: “I have one simple message to convey to you and that is: I’m 100 per cent supportive of this merger. I firmly believe it is the right deal for customers, shareholders and employees. The UK, Germany and Europe as a whole will benefit. Together our complementary businesses and footprint will enhance our global offering, making us even more competitive.”

The LSE, which already owns Milan-based Borsa Italiana, is one of the world’s oldest stock exchanges and can trace its history back more than 300 years.