LSE-Deutsche Boerse merger thrown into chaos: Reactions from City analysts and Westminster
Last night's announcement that the mega-merger between the London Stock Exchange (LSE) and Deutsche Boerse may have been derailed entirely by competition concerns in Europe has left the City reeling.
The £21bn merger, which had overcome the potentially devastating hurdle of Brexit without so much as a shrug, was thrown into chaos last night after it emerged regulators were likely to block the deal unless LSE can sell its majority stake in an Italian bond trading platform – a sale which LSE said it "could not commit to".
Here's how the City has reacted:
Read more: The inside story of how the LSE's mega-merger was suddenly derailed
1. It may have been blocked anyway |
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"The new regulatory challenge could be insurmountable. On a side note, there are other important issues that would potentially block the $13 billion deal that LSE and Deutsche Börse are working on for the past year, such as the Britain exiting the EU, the potential divergence the Brexit could generate between Briton and German officials, as well as the loss of competition in the sector." – Ipek Ozkardeskaya, senior market analyst, London Capital Group |
2. This is not the end of the story |
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"Yes it's clear the parties to the deals themselves are beginning to look at this deal more carefully to look again at whether it's in their commercial interests . LSE's unwillingness to be forced to sell its Italian business is it seems to me symptomatic of a rethink post the Brexit decision. "However this is not the end of the story and there is still a pressing need for the regulators in the U.K. to look at this responsibly from the perspective of UK Plc." – Anne Marie Morris, Conservative MP |
3. There is a long way to fall |
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"LSE is trading sharply lower as it becomes clear that the merger with Deutsche Borse is on a knife-edge. LSE is teetering – its shares were trading up around 50 per cent since the merger was first mooted last February. "There is a long, long way to fall if this tie-up dies. The regulatory hurdles were always a risk and with Brexit there are additional hurdles to clear that seem close to insurmountable now.” – Neil Wilson, senior market analyst, ETX Capital |
4. The merger would probably not have benefitted London |
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"Concerns from other EU countries appear to have ended the LSE Deutsche Boerse merger. Escalating requests from countries and particularly France suggest concerns that Frankfurt would be too great a beneficiary from the Brexit fallout. This would be at the expense of France and Paris in particular who would expect to pick up significant trade from Brexit without the merger. "The merger would have subsequently allowed an orderly transfer of some markets towards Frankfurt. This, in turn, meant shareholders and boards of both companies would have an in-built hedge against any Brexit downside. No doubt in time the head office would also have migrated to Frankfurt in substance if not name. The merger would probably not have benefitted London as a financial centre as the merger would have been intent on moving trade to within the EU. "Now the LSE will be fighting to keep trade and markets in London. For Theresa May this is the second major stroke of luck in a week, following the Kraft Heinz withdrawal from the Unilever bid. If the LSE Deutsche Borse merger had progressed Theresa May would have been under some pressure for allowing the facilitation of trade migration to the EU." – John Colley, professor of practice, Warwick Business School |