The London Stock Exchange is expecting to realise EUR25 million in IT rationalisation and other cost savings as it agrees a revised £284 million cash offer to buy a majority stake in LCH.Clearnet.
The Exchange has been engaged in extended negotiations with the UK-based clearer after terms for an earlier bid were rocked by new collateral rules for clearing counterparties in Europe.
Under the revised terms, LSE will acquire a higher 55% stake in LCH.Clearnet (in addition to its current 2.3% stake) at EUR15 per share, valuing the clearer at EUR633 million. The London exchange group has also committed a further EUR185 million to a EUR320 million fund raising effort in order to boost capital to meet regulatory demands.
LSE chief Xavier Rolet says: "Our partnership with LCH.Clearnet will be transformative. Together with our customers, we will promote greater innovation, choice and competition in the risk management industry, especially in listed derivatives. This new-style open-access clearing model, will build upon the successes we have already had with our existing equity and fixed income trading partnerships, Turquoise and MTS."
He says the combined group is expected to achieve run rate cost savings of approximately €25 million "largely from efficiencies in IT" citing procurement savings, data centre and outsourcing rationalisation and 'other operating efficiencies'; and through de-duplication of functions, property rationalisation, and non-IT procurement savings.