The London Stock Exchange and Deutsche Bourse have agreed the terms of a blockbuster "merger of equals", shrugging off the tentative advances from rival suitors for the UK exchange.
The merged group, valued at $30 billion, would see the London exchange holding a 45.6% stake in a specially created holding company, with Deutsche Bourse shareholders scooping up the remaining 54.4%. The special purpose holding company, TopCo, will be domiciled in London.
Between them, the companies are projecting EUR450 million of costs savings each year after the deal is sealed through "technology enabled efficiencies, removing duplication in the corporate centre and business segment optimisation". It will take three years post-merger before the costs benefits begin to be realised.
LSE chief executive Xavier Rolet, who will retire if the deal goes ahead, fended off concerns that the bulk of IT operations would shift from London to Frankfurt, saying there would be a "balanced" distribution between the two.
Commending the deal, Deutsche Bourse CEO Carsten Kengeter, made great play of the benefits to European interests of a combination between the EU's dominant exchanges, mindful of the remaining interest of IntercontinentalExchange and other US suitors in upending the transaction with an alternative offer for the LSE.
"Strengthening the link between the two leading financial cities of Europe, Frankfurt and London, and building a network across Europe with Luxemburg, Paris and Milan will strengthen European capital markets," he says. "It is the logical evolution for our companies in a fundamentally changing industry. As a Combined Group we will create a European player that will compete on a global basis."