|
UK-German market deal off
|
 |
September 12, 2000: 10:12 a.m. ET
London exchange drops tie-up with Frankfurt to fight off hostile Swedish bid
|
LONDON (CNNfn) - In a surprise move that throws the fate of Europe's largest stock market into question, the London Stock Exchange Tuesday abandoned a planned merger with its German counterpart the Deutsche Boerse, ending a combination fraught with problems from the start.
In calling off the merger, the LSE said it wanted to focus on fending off an unsolicited $1.2 billion offer launched two weeks ago by OM Gruppen, the operator of the far smaller Stockholm stock exchange. The merger of the German and U.K. bourses would have created an electronic exchange called iX, big enough to rival the Tokyo Stock Exchange, the world's third-largest.
"When the OM offer has been seen off, the board, in full consultation with shareholders and customers, will review the means by which London's pre-  eminent role in European equities trading can best be promoted," said LSE Chairman Don Cruickshank, his words a recognition that many of the LSE's shareholders felt the exchange consulted too little with them over the plan to form iX.
The OM Gruppen bid, perhaps the final straw in disrupting the German-U.K. merger, brought into full relief the regulatory and managerial difficulties that faced the alliance. The Swedish group on Monday formal details of its unsolicited bid Monday. Under U.K. takeover rules, that triggered a 60-day deadline for LSE shareholders to accept or reject the offer, and forced the London exchange to respond.
The LSE has not discussed merging with any other bourses, Cruickshank said Tuesday. He made clear that the issue would be taken up at the exchange's general shareholders meeting, set for Thursday.
The Deutsche Boerse told CNNfn that it received the LSE statement "with regret". A spokesman quoted Chief Executive Officer Werner Seifert as saying the Frankfurt exchange would "consider its options."
Further German response expected
Asked whether this meant that the Deutsche Boerse plans legal action against the LSE, a spokeswoman said: "Draw your own conclusions." A person close to the German exchange said its reaction to the setback would be revealed "very soon."
OM Gruppen, for its part, reveled in its role as spoiler.
"This is round one to OM," said David Verey, chairman of Lazard, which is advising OM Gruppen in its offer. "If this restores sense to the London Stock Exchange, all well and good." He rejected recent reports that said the Swedish exchange operator was maneuvering to bring in Nasdaq, the U.S.-based high-tech stock market, as an ally for its hostile bid.
Nasdaq had agreed to form an alliance with iX, and exchanges in Milan and Madrid initially said they were interested in ultimately becoming partners of iX.
The marriage of the London and Frankfurt exchanges drew criticism almost from the day it was announced, on May 3. Shareholders of the exchanges quickly questioned how much control that they would have in a unified exchange.
Critical report leaked
Compounding the concern about the LSE-Deutsche Boerse merger was last week's leak of an internal report commissioned by Merrill Lynch & Co. (MER: Research, Estimates), one of the LSE's biggest customers and a key supporter of the London-Frankfurt merger plan, which concluded that the deal was "unworkable" and would take years to yield the anticipated benefits.
A key concern was how the two exchanges would resolve the issue of contrasting regulatory codes, and which national authority would have the ultimate responsibility for policing iX.
Nevertheless, stock exchanges around the world have been striking alliances and mergers to simplify trading, reach out to more investors and reduce costs.
The debut of Euronext, the stock exchange formed by the merger of stock markets in Paris, Brussels and Amsterdam, is expected to take place on Sept. 22.
Shares of OM Gruppen, the world's first publicly traded stock market operator, rose 19.5, or 4.5 percent, to 452 Swedish crowns Tuesday. The London Stock Exchange, whose shares change hands only through blue-blooded London securities firm Cazenove, fell 30 pence, or 1 percent, to 2,975 pence. 
|
|
|
|
|
 |
|
.
