EU Commission blocks $30 bn London-Frankfurt stock exchange merger

8 years ago - Published in Finance, Fundamental Analysis

The merger between the Deutsche Börse and the London Stock Exchange has been vetoed by the European Commission because of competition concerns, ending a third attempt in 17 years to unite the financial hubs of London and Frankfurt.
In a statement on Wednesday, EU Competition Commissioner Margrethe Vestager said Britain's decision to leave the 28-nation bloc had played no role in banning the tie-up.

The $30 billion merger would have created Europe’s largest stock market operator by far, leaving the combined company better positioned to compete with American rivals. The operation was announced on March 2016, three months before British voters decided in a referendum to leave the European Union.
"The merger between Deutsche Börse and the London Stock Exchange would have significantly reduced competition by creating a de facto monopoly,"  she said, adding: "As the parties failed to offer the remedies required to address our competition concerns, the Commission has decided to prohibit the merger." And added "That is not just important for banks and other financial institutions. The whole economy benefits when businesses can raise money on competitive financial markets."

The commission also found that the merger would have removed so-called horizontal competition for the clearing of single-stock equity derivatives. 

The deal would have combined Deutsche Boerse’s Frankfurt-based clearing house, Eurex, with LSE’s LCH.Clearnet and the Rome-based Cassa di Compensazione e Garanzia. The decision was widely expected after the LSE last month said it had refused the European Commission's request to divest its majority stake in Italian trading platform MTS. 

Both companies had insisted that the deal made sense even in case of Brexit.

London Stock Exchange Group said it "regrets" the commission's decision, as the deal would have created a "world-leading" financial markets firm. It warned last month that the deal was unlikely to receive EU approval over concerns that it would limit competition.

Deutsche Boerse, which also operates the Luxembourg-based clearing house Clearstream and the derivatives platform Eurex, this month said it still had global ambitions despite the failure.