Bengaluru: London Stock Exchange (LSE) Group has agreed to sell its French clearing business to Euronext for €510m ($534m), as it seeks to win regulatory approval for its proposed merger with Deutsche Boerse.
The European Commission has expressed antitrust concerns about the $28bn merger and the impact on the clearing of derivatives contracts in particular. The Commission, in a document on the issue, has not made clear if the sale of the French clearing business, LCH Clearnet SA, would be enough to dispel its concerns, two sources told Reuters.
A person directly involved in the merger process said he did not believe the sale alone would address the Commission’s concerns.“I have doubts that this is enough,” he said. He suggested that LSE might also opt to sell Borsa Italiana, operator of the Milan stock exchange, to help address antitrust concerns, although a second source familiar with the process said that a sale of Borsa Italiana was not being discussed at the moment.
LSE Group and LCH Group said in a joint statement they had agreed on the terms of Euronext’s all-cash offer, after announcing last month that they were in exclusive talks with Euronext on a sale. A major hurdle to LSE’s merger with Deutsche Boerse is how antitrust regulators define derivatives market.
LSE and Deutsche Boerse plan to formally submit the Clearnet SA sale as a remedy to the European Commission’s concerns in the next few days sources told Reuters.
A major hurdle to LSE’s merger with Deutsche Boerse is how antitrust regulators define the derivatives market.
Deutsche Boerse is hoping that the European Commission will treat over-the-counter (OTC) derivatives contracts and on-exchange traded derivatives as two separate markets, sticking to a market definition the Commission confirmed back in 2012.
Deutsche Boerse’s Eurex is mainly active in exchange-traded derivatives, while the LSE’s LCH.Clearnet is active in the OTC business.
But Deutsche Boerse has acknowledged that the European Commission may change its mind, prompting the merger partners to make concessions such as selling LCH Clearnet SA to avoid the LSE-Deutsche Boerse combination being regarded as a dominant player.
“It seems the market definition is changing,” Deutsche Boerse Chief Financial Officer Gregor Pottmeyer said about the European Commission’s antittrust deliberations in November.
