LSE/Deutsche Boerse not approached by CME - sources
* "No sound whatsoever" from CME, person says
* Stronger rationale for CME move for Deutsche Boerse
CME Group has approached neither London Stock Exchange (LSE) nor Deutsche Boerse regarding a possible acquisition, according to two people briefed on the matter and a source familiar with LSE’s position.
As reported, sector bankers previously said US exchange operator CME could see reason to bid for Deutsche Boerse or LSE, as could rival Intercontinental Exchange (ICE). ICE on 4 May withdrew its indication of interest in LSE, but analysts have said a bid from CME should not entirely be ruled out. Since ICE’s withdrawal, CME has in several reports been tipped as a potential interloper in the European exchange merger.
CME has not approached Deutsche Boerse to request information or propose any talks, said the first person, briefed on the German group’s situation. CME has made “no sound whatsoever”, added the second person, briefed on LSE’s position.
CME, LSE and Deutsche Boerse declined to comment.
Under the UK’s Takeover Code Rule 2.2, the Takeover Panel can require potential rival bidders to announce their intentions in certain circumstances.
However, the Panel has not asked CME for any such information, a person briefed on the US company’s position said. The Takeover Panel did not return calls for comment.
ICE walking away from LSE could potentially reduce CME’s incentive to bid for one of the European exchange operators, the source and the second person agreed.
Had it acquired LSE, ICE would have added significant scale, but this competitive threat to CME is now reduced, the second person added. One would also have expected CME to announce its intentions, or to see some leaks on its preparations by now if the company was preparing an approach, the source and the second person argued.
LSE and Deutsche Boerse first flagged their potential merger on 23 February.
Given acquisitions in the exchange operator industry are complex and time-consuming, CME should already have launched an approach as its timeline for a potential bid is ticking away, it was said.
LSE and Deutsche Boerse expect their merger to close in late 2016 or early 2017, according to the deal announcement.
The person briefed on Deutsche Boerse’s position would not speculate on CME’s intentions but pointed to a recent comments from the US company’s chairman Terry Duffy.
Duffy in a 28 April video interview with Bloomberg declined to comment on any specific M&A situations but said his company had already put itself in a strong position if the LSE/Deutsche Boerse merger closes and could compete with any exchange.
If CME made a move on either of the European operators, it would likely have the stronger business case for buying Deutsche Boerse, two sector bankers agreed.
The US company would likely find Deutsche’s derivatives business Eurex and its post-trade unit Clearstream attractive, the first argued. The German company’s smaller cash equities business compared with LSE could also make it a better fit for CME, he added.
As with ICE, CME’s case for buying LSE would be weakened if the UK votes in June to leave the European Union, the second banker argued. Both US companies have reduced scope to reduce tax bills via cross border mergers inversions following US Treasury rule changes announced last month, he said.
Still, a CME bid for Deutsche Boerse would likely meet even tougher hurdles than a takeover of LSE, both sector bankers and a third agreed. Local German regulators and politicians could be inclined to block a hostile bid for the Frankfurt-based company, the first and third said. Unlike LSE, Deutsche Boerse is not “in play” as it is effectively the acquiring party in the planned merger, the second added.
Though billed as a merger of equals, Deutsche Boerse’s shareholders will control 54.4% of the UK TopCo resulting from the planned LSE tie-up.