Deutsche Boerse considers cutting LSE merger approval threshold

  • Business
  • Tuesday, 12 Jul 2016

BENGALURU: London Stock Exchange Group Plc and Deutsche Boerse are considering lowering the approval threshold they need to achieve from the German exchange’s investors to push their deal through, as they try to keep the merger on track following Britain’s vote to leave the European Union.

Deutsche Boerse said on Sunday it was concerned that the 75% threshold for its shareholders to approve the deal might prove difficult to cross because index funds which hold up to 15% of its shares are unable to accept the offer until the minimum level of acceptances has already been reached.

The companies said in separate statements that the parties involved were looking at the potential for lowering the minimum acceptance threshold “with a view to enabling index funds to participate in the offer”.

“The fact that Deutsche Boerse is considering lowering the threshold leads us to believe the vote could be much closer than that of LSE’s 99% approval,” Keefe, Bruyette & Woods (KBW) analysts wrote in a note.

The British company asked its shareholders to back its US$27bil merger with its German counterpart to create a European exchange giant on July 4 at a subdued, short meeting, dismissing concerns it was “shackling itself to a corpse” after the EU referendum result.

Deutsche Boerse was to ask its shareholders to back the deal – the third attempt by the LSE to merge with the German exchange operator in some 16 years – in a postal vote that closes on July 12.

However, if the threshold is lowered there will be an extension of the acceptance period for a further two weeks.

Numis Securities analyst Jonathan Goslin told Reuters that the move was largely a technicality and that there are bigger hurdles for the merger to pass further down the line.

“This is just a step along the way to the deal completing but they still need regulatory approval before anything can be done,” he said.

LSE said on Thursday that US and Russian authorities had approved the merger, giving it the first set of regulatory clearances.

However, financial regulators in Germany and Britain, along with European Union antitrust authorities, are likely to pose a sterner test.

Last month, German markets regulator BaFin said it was hard to see how the head office of the merged group could be in London given that Britain was leaving the EU. – Reuters.

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