The London Stock Exchange (LSE) merger with Deutsche Borse was blown off course last night as EU regulators looked set to block the deal.
The European Commission “unexpectedly raised new concerns” regarding the LSE’s majority stake in Italian bond trading platform, MTS.
The Commission wants the LSE to sell MTS, which the stock exchange said in a statement was “disproportionate”. The LSE had put forward an alternative, which it deemed was “effective and capable of ready implementation”, but the Commission rejected it.
The stock exchange, which is headed up by Xavier Rolet, said it could not agree to Brussels request to divest MTS. “Taking all relevant factors into account, and acting in the best interests of shareholders, the LSE board today concluded that it could not commit to the divestment of MTS,” the exchange, whose deal with Deutsche Borse is valued at £21 billion (€24.8 billion), said in a statement.
The statement went on: “Based on the Commission’s current position, LSE believes that the Commission is unlikely to provide clearance for the merger.”
The Commission has set a deadline of midday today for the LSE to propose a new remedy.
The LSE appears unwilling to let the deal die. “The LSE board is highly confident in the strength of LSE’s business, strategy and prospects on a stand alone basis, under its strong management team led by chief executive Xavier Rolet.”
The stock exchange had agreed to sell its clearing business, LCH, to rival Euronext as part of the deal. It felt that a sale of MTS would face a myriad of regulatory issues, not just from the Italian authorities but also Belgium, France and the US.
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