Pan-European exchange operator Euronext has made its first public admission of preliminary merger talks with Deutsche Börse, but says discussions broke down because of contrasting views over the handling of management, ownership and technology issues in a combined group.
Euronext confirmed media speculation about a possible link-up with German rival Deutsche Börse in a statement accompanying its year-end guidance figures.
The Exchange says it is studying proposals for a return of capital to shareholders following a year of strong revenue growth, but it has not ruled out a bid for the London Stock Exchange or a resumption of talks with Deutsche Börse.
It says further consolidation of European securities exchanges is desirable for shareholders, exchange users and issuers. But it argues that mergers between exchanges can only be successful if they are supported by exchange users, acceptable to regulators and structured so as to allow the available synergies to be realised in full with certainty.
This means that "cash and derivatives trading platforms should be consolidated independently from clearing and settlement infrastructures. Furthermore experience shows, based on market users demands, that a successful integrated cross-border exchange model, such as that created by Euronext, requires the business organisation to respect the local management and market requirements while having at the same time a neutral legal structure and domicile for the group."
The statment adds that the appropriate and efficient organisation of technology, as demonstrated through Euronext's own joint venture AEMS2, "is critical to ensuring that IT synergies can be captured fully and swiftly".
The Exchange says that preliminary conversations in late 2005 indicated that Deutsche Börse "held at that time different views on some of these important issues", but added that it "remains open to further discussions".
The Exchange says that it is also continuing to co-operate with the UK's Competition Commission, which is investigating the market impact of an LSE takeover.
In its earnings update, Euronext raised Ebita guidance for 2005 by 10% to €330m after a strong showing in all divisions. The Exchange says it achieved a 25.4% jump in fourth quarter turnover, leading annual revenues to €961.9m, up 8.5% compared to the €886.8mn realised in 2004.