Things come in threes…for the third time merger attempts between LSE and Deutsche Börse are heading towards failure.
Following the announcement of the merger, the European Commission opened an in-depth investigation on 28th of September 2016 to assess, under the EU Merger Regulation, whether the proposed merger between Deutsche Börse and LSE would reduce competition in several financial market infrastructure areas. The tie-up would create a stock exchange group that could compete with the Chicago Mercantile exchange and ICE in the US as well as the Hong Kong stock exchange in Asia.
On the 6th of February, the European Commission (DG Competition), requested LSE, which runs the Milan stock exchange, to sell its majority stake in its Italian division (LSE has a 60% stake in MTS within a consortium of 26 shareholders). LSE said it would not be able to meet this new condition requested by DG Competition.
LSE called the EU’s demands “ disproportionate” and added that a sale would damage its relationships with Italian regulators and would not commit to selling the unit : “The LSE board believes it is highly unlikely that a sale of MTS could be satisfactorily achieved, even if LSE were to give the commitment. Moreover, the LSE board believes the offer of such a remedy would jeopardise LSE’s critically important relationships with these regulators [in Italy] and be detrimental to LSE’s ongoing businesses in Italy and the combined group, were the merger to complete.”
Following this new requirement from the DG Competition, LSE said it was “ highly unlikely” it would be able to meet antitrust conditions set by the European Commission for its tie up with the Frankfurt stock exchange operator. In an attempt to address EU competition concerns, the companies had already agreed to sell the French arm of LCH, a clearing house majority owned by the LSE that processes equity, fixed income and derivatives.