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Euronext under pressure to pursue Deutsche Börse merger

17 January 2006  |  8808 views  |  0 Euronext

Pan-European exchange Euronext is under pressure from one of its largest shareholders to kick-start merger talks with rival exchange Deutsche Börse and drop its takeover bid for the London Stock Exchange (LSE).

US hedge fund Atticus Capital - which says it now owns a 9.1% stake in Euronext - has cast doubt over a possible merger between the European exchange operator and LSE after saying it would "support a friendly merger of equals between Euronext and Deutsche Börse".

In a statement, David Slager, senior portfolio manager at Atticus, says a merger between the two "would create a formidable Euro zone champion with the resources and franchise to compete for global liquidity and global listings".

"Significant cost savings would benefit both shareholders and customers of the merged company, making the European capital markets more efficient," he adds.

Euronext and Deutsche Börse said in December that senior executives from each exchange had met for talks that included the subject of a possible merger. But the talks stalled in January after the companies reportedly disagreed about the location of the combined group's headquarters.

Atticus says it was happy to hear that negotiations had taken place, but it was disturbed that the merger talks had stalled, reportedly over relatively minor issues.

"We would encourage both management teams and supervisory boards to reconsider the benefits of a combination of the two companies," says Slager.

Last year Atticus, which is also a significant shareholder of Deutsche Börse, vocally opposed the German exchange's acquisition bid for the LSE. Deutsche Börse was forced to abandon its £1.35bn bid for the UK market operator following increasing opposition to its takeover plans from its shareholders, which eventually led to the resignation of CEO Werner Seifert in May.

Rumours surfaced this week that Euronext was close to pulling its bid for the LSE - which hasn't been disclosed - because shares in the UK market operator have risen too high, making any potential deal too expensive.

LSE stock has soared over recent months on the back of takoever talk. The share price is now almost £1 more than the offer from Australia's Macquarie Bank, which has bid 580 pence a share for the UK exchange - a price dismissed as "cheap" and "derisory" by the LSE.

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