Deutsche Börse suggests dual holding company after LSE merger
Deutsche Börse has floated the idea of setting up a dual holding company after its merger with the London Stock Exchange Group as a way of assuaging German regulatory concerns about the deal.
Under the finely-balanced terms of the €20bn deal announced in March, the new group will have a single holding company, to be based in London, while Carsten Kengeter, chief executive of Deutsche Börse, will head the combined entity.
However, since the UK voted two weeks ago to leave the EU, there have been mounting signs of resistance from German politicians and regulators. They object to locating some of the country’s key financial infrastructure outside the EU. Instead, some politicians want the headquarters to be in Frankfurt. Amsterdam has also been mentioned as an alternative in recent days.
According to one investor, Mr Kengeter — who has been meeting shareholders in an effort to make sure that they back the deal — suggested to some investors that one way to assuage regulators’ concerns would be to set up two holding companies, rather than one.
These two holding companies, one of which would be situated in the EU, would be supplemented by a joint-operating company, which would reap the synergies envisaged by the deal. People close to the situation stressed that no concrete decisions about adapting the deal had been taken.
Deutsche Börse said: “We decline to confirm that Mr Kengeter made these comments.”
Any changes would have to be made after the deal has gone through, however, since its terms are binding and LSE shareholders backed them in a vote this week. Deutsche Börse’s shareholders must decide by July 12 whether or not to approve the deal.
One adviser familiar with the talks said the terms could not be changed even after the deal had closed, and the two exchanges said in a joint statement. “We refer back to our previous statements on this matter — those still stand. The terms of our deal — which are binding — remain unchanged.”
Two top-20 shareholders in D Börse said on Tuesday that they would back the deal, while others have yet to make up their minds.
In a separate statement on Tuesday, D Börse emphasised that “the agreed transaction includes all necessary mechanisms” to cope with the fallout from the UK’s referendum.
The company has set up a referendum committee, which is due to meet for the first time at the end of this month.
“In a fast-changing landscape where it is anticipated that the UK will remain a member of the EU for at least two years, the work of the referendum committee may take many months to complete,” D Börse said.