US exchange ICE shelves plans for London bourse counter bid

  • Business
  • Wednesday, 04 May 2016

A worker shelters from the rain as he passes the London Stock Exchange in the City of London at lunchtime October 1, 2008. REUTERS/Toby Melville/File Photo

LONDON/BENGALURU: The New York Stock Exchange’s owner shelved plans on Wednesday to gatecrash a merger between London Stock Exchange Group Plc (LSEG) and its German counterpart, saying it no longer intended to stage a rival bid for the British bourse.

Intercontinental Exchange Inc’s (ICE) CEO Jeffrey Sprecher accused the London exchange of failing to respond to the US group’s approaches despite several attempts to arrange meetings, meaning it did not have enough information to make a formal offer. LSEG declined to comment on ICE’s statement.

LSEG announced plans to merge with Deutsche Boerse  in February, prompting ICE to say a week later that it was considering its own bid.

“Following our public expression in March of interest under the UK takeover code, the LSE chairman and CEO did not engage with ICE,” Sprecher said on a conference call.

“We’re turning our focus to other opportunities to build on our track record of growth.”

Some LSEG investors said they were annoyed at the company’s apparent refusal to entertain ICE’s approach.

“We are disappointed that a rival and credible bidder has been frustrated due to ‘insufficient engagement’ on behalf of the LSE board,” said Jamie Hooper, a fund manager at AXA Investment Managers.

Sprecher said ICE’s advisers spent the last two months trying to see if they could come up with a deal that would meet ICE’s return on investment threshold and offer LSEG shareholders a meaningful share price premium, but had had little response from the London exchange.

“You only have one chance to merge or sell yourself, so you really should be doing everything to get the best price for shareholders,” said one of LSEG’s 20 largest investors, speaking anonymously. “It is now debateable whether doing this deal with DB (Deutsche Boerse) really is.”

LSE’s largest shareholder, the Qatari Investment Authority, which holds around a 10% stake according to Thomson Reuters data, declined to comment.

ICE’s announcement puts the brakes on a potential takeover battle in the exchanges sector, making it less likely that Deutsche Boerse will have to sweeten the terms of its all-share merger with LSEG in order to win shareholder approval.

LSEG’s shares fell as much 10% following ICE’s announcement before recovering to close down 4.25, while Deutsche Boerse rose 6% and ICE jumped 8.2% at the New York open.

“While the door to an offer is not completely closed, it appears highly unlikely without a material change in circumstances,” analysts at Jefferies said in a note after ICE’s announcement.

Regulatory concerns

A takeover by ICE would have created the world’s biggest exchange group, spanning the Atlantic and trading and clearing stocks, derivatives, energy and commodities.

However, there were concerns about whether European regulators would have approved such a deal, and how attractive the combination would be should Britain vote to leave the European Union in a referendum on June 23.

LSEG chief executive Xavier Rolet made comments in media interviews last month, some of which were critical of ICE, including one where he described ICE’s ownership of European stock platform Euronext as “a disaster”.

LSEG later said views expressed in one interview had been his own.

ICE still has the right to reconsider and make an offer for LSEG within the next six months, provided it has approval from the British Panel on Takeovers and Mergers, or if the LSEG-Deutsche Boerse merger falls through or another bidder comes in for the UK bourse.

ICE’s made the announcement as it reported a 16.7% jump in first-quarter net income, driven by higher data fees.

The US exchange released its results a day before a deadline to submit a plan to British regulators assuring them that its recent takeover of commodities trading software house Trayport will not be anti-competitive.

ICE, which began as an energy exchange in 2000 and has expanded through acquisition of companies including the New York Board of Trade, closed its deal to buy Trayport in December for about US$650 million in stock.

The UK competition watchdog had threatened to investigate ICE if it does not meet the May 5 deadline. - Reuters

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