The London Stock Exchange has confirmed that it is holding merger talks with Deutsche Bourse under a reverse takeover deal that would give the German exchange a 54.4% stake in the combined group.
In a statement responding to speculation that triggered a sharp rise in the share price of both exchanges, the LSE says the proposed merger would lead to an "an industry-defining combination, creating a leading European-based global markets infrastructure group".
"The combination of LSE and Deutsche Bourse's complementary growth strategies, products, services and geographic footprint would be expected to deliver an enhanced ability to provide a full service offering to customers on a global basis," says the London exchange. "LSE and Deutsche Bourse believe that the potential merger would offer the prospect of enhanced growth, significant customer benefits including cross-margining between listed and OTC derivatives clearing (subject to regulatory approvals), as well as substantial revenue and cost synergies and increased shareholder value."
Under the proposals, the board of the combined group would be represented by equal numbers of LSE and DB directors and all key business units would continue to operate under their current brand names.
Discussion are continuing, with both parties stressing that any transaction would be subject to regulatory approval, LSE shareholder approval and Deutsche Bourse shareholders' acceptance, as well as other customary conditions.
The latest talks mark the second occasion on which both parties have performed a courtship dance, following a failed takeover attempt by the German exchange group in 2004.
Speaking to Bloomberg TV in November, LSE chief Xavier Rolet Rolet said that more consolidation is coming in the industry, and will only leave a handful of major exchange operators in the world, likely from the US, China and Europe.
“It’s starting to happen,” Rolet told the newsire. “Our industry is like a giant construction site.”