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UK watchdog approves LSE takeover bids with conditions

01 November 2005  |  7773 views  |  0 London Stock Exchange

Britain's Competition Commission (CC) has given the go ahead to Germany's Deutsche Börse and pan-European exchange Euronext to bid for the London Stock Exchange (LSE), but on condition that they ensure the UK exchange's clearing provider remains independent.

The watchdog, which has completed a seven month inquiry into the possible takeover of the LSE, says Deutsche Börse and Euronext must take steps to reinforce the independence of the LSE's clearing house, LCH.Clearnet, if a takeover by either party is successful.

Under the watchdog's conditions, Euronext - which is the only bidder with an offer still on the table - has to reduce its stake in LCH.Clearnet from 41.5% to no more than 14.9%. Euronext also has to reduce it representation of the LCH.Clearnet board to just one seat.

In a statement Euronext says its will review the report and analyse the economic impact of a possible divestment of its shareholding in LCH.Clearnet.

Despite dropping its £1.35bn proposal for the UK market operator earlier this year, Deutsche Börse asked regulators to continue to examine its bid to buy the LSE. The CC says that the German exchange would have to reduce its stake in its wholly-owned clearing services firm, Eurex Clearing, to 14.9% if any bid for the LSE is successful. The Börse had previously intended to switch the LSE to its own clearing services provider.

Both exchanges launched bids for the LSE late last year but Deutsche Börse's withdrew its offer following a shareholder revolt which evenutally led to its chief executive being ousted in May.

According to press reports, Euronext is also facing pressure from its shareholders over its LSE bid and, as a result, is thought to be considering making an all-share offer for the LSE rather than a cash bid.

In August Australia's Macquarie Bank said it was considering making a cash bid for the LSE as part of a consortium but further details have not been disclosed.

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