LSE and Deutsche Börse to merge in all-stock deal

The London Stock Exchange Group Plc (LSEG) and Deutsche Börse AG (DBAG) today announced that they would merge in an all-stock deal and create a leading Europe-based global markets infrastructure group.

Under the terms of the deal, the merger will be executed through the creation of a new UK holding company known as ''UK TopCo'' which will acquire LSEG by way of a scheme of arrangement.

The LSEG will be acquired by UK TopCo and the DBAG will make a securities exchange offer to all shareholders of DBAG.

LSEG shareholders will receive 0.4421 UK TopCo shares and DBAG shareholders one UK TopCo Share in exchange for each DBAG share.

Post closing DBAG shareholders will hold 54.4 per cent stake in UK TopCo, while the remaining 45.6 per cent will be held by LSEG shareholders.

The combined company would be worth about $30 billion, based on both companies market capitalization.

The combined company would generate about €450 million ($450 million) of cost savings each year post closing.

LSEG's current chairman Donald Brydon would be chairman of UK TopCo, while DBAG's chief Carsten Kengeter would be its CEO, both companies said in a statement.

UK TopCo will be based in the UK with a primary listing in the FTSE 100, as well as on the Frankfurt Stock Exchange and have corporate headquarters in both London and Frankfurt.

The two exchange operators last month said that they had entered into talks on a merger.

Both Exchanges said in a statement that the merger would create a leading Europe-based global markets infrastructure group with a highly complementary combination of asset classes to improve growth for both companies whilst offering an enhanced product offering for customers.

Xavier Rolet, CEO of LSEG, who will step down post merger and be an adviser, said, ''We are creating an industry-defining combination which will be a leading global market infrastructure business, very well positioned to create new benefits and efficiencies for our customers and increase value for our shareholders.''

Carsten Kengeter, CEO of DBAG said that  the merger would strengthen the link between the two leading European financial cities of Frankfurt and London whilst developing a network across Europe with Paris, Luxemburg and Milan which will allow European capital markets to become stronger and become a strong global player.

But the deal may be torpedoed by New York Stock Exchange owner Intercontinental Exchange, which last month said that it is mulling to make a bid for LSEG. (See:  ICE mulls bidding for London Stock Exchange Group)

Atlanta-based ICE had said in a statement that it had not taken a final decision on whether to make an offer, nor has it approached LSEG's board about a merger.

Analysts believe that ICE would wait until DBAG tables a formal offer for LSEG before 22 March as per the UK takeover rules, while ICE must make an offer for LSEG by 29 March.