The London Stock Exchange says it is withdrawing from a proposed merger with Germany's Deutsche Borse so that it may fight off a hostile bid from Sweden's OM Gruppen. The decision leaves the LSE exposed as a potential takeover target and fundamentally alters the landscape for exchange consolidation in Europe.
In a statement, the LSE acknowledged that the iX merger deal had failed to enthuse shareholders or industry participants. "The Board was well aware that such an ambitious plan required a number of issues to be resolved, some of which were outside the LSE's control. It is clear from the shareholder, customer and regulatory issues raised, which the Board has sought to reconcile, that it is not possible to pursue this proposal in parallel with a bid defence under a Takeover Code timetable."
Industry observers say the OM takeover bid has provided the LSE with a convenient excuse to extricate itself from an unpopular merger deal with its largest rival on the continent. Rival bids are now expected from any combination of Euronext - the Paris/Amsterdam/Brussels axis, Nasdaq, and Deutsche Borse itself
Don Cruickshank, chairman of the LSE, says: "There is very real value in the LSE, even though it has had so few months of life as a commercial for-profit company. When the OM offer has been seen off, the Board, in full consultation with shareholders and customers, will review the means by which London's pre-eminent role in European equities trading can best be promoted in both their interests."
The Deutsche Borse expressed regret at the LSE's decision. Wener Seifert, CEO says the exchange will now "reconsider its position".