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 But the deal, which marks a third attempt to link the Frankfurt and
London exchanges, may prompt a bidding war after New York Stock
Exchange owner Intercontinental Exchange said it may make an offer
for the British group.
Nearly 16 years after Deutsche Boerse first tried to take over LSE,
the London and Frankfurt exchanges said last month they were
discussing an all-share merger, which they confirmed on Wednesday
would give Deutsche Boerse shareholders 54.4 percent and LSE
shareholders 45.6 percent of a new company.
In a combined statement the exchanges sought to sell the deal, which
they described as "a premium free merger of equals", to their
investors with the lure of potential annual cost savings of 450
million euros ($500 million).
They also promised their users - the banks and fund managers who pay
fees to trade and companies who pay to be listed - "substantial
benefits", although they gave no figures.
And in a clear effort to win over Europe's politicians to the
benefits of a dominant pan-European exchange, Deutsche Boerse Chief
Executive Carsten Kengeter said it would enable Europe to enhance
its capital markets.
This chimes with European Union plans to establish a "Capital
Markets Union" to bolster the region's financial markets to compete
better with the United States and Asia.
Despite these incentives, the deal faces questions about what
happens if Britain votes to leave the European Union in a referendum
in June and whether regulators will give the nod to the creation of
a huge presence in derivatives clearing.
Kengeter said the time was right for a merger which will combine the
LSE's share-trading operation with the derivatives trading of
Deutsche Boerse's Eurex.
"We strongly believe this is the right transaction at the right time
for our two companies," Kengeter told reporters, adding that he
expects the deal to close by the end of 2016 or in early 2017 after
a very broad regulatory review.
BALANCE OF POWER
Kengeter shrugged off concerns over the impact of Britain, Europe's
biggest financial center, voting to leave the EU.
"We will be having a successful transaction irrespective of the
Brexit outcome," he said.
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In further efforts to keep all parties happy, the exchanges
confirmed a balance of power between Britain and Germany in the
combined group, with LSE Chairman Donald Brydon becoming chairman of
the new company, while Kengeter would be CEO.
The combined companies’ board would be made up of equal numbers of
LSE and Deutsche Boerse directors. The new firm, which will be
domiciled in Britain, with a primary listing in the blue-chip FTSE
100 <.FTSE>, will also have a home on the Frankfurt Stock Exchange
and have corporate headquarters in both cities. LSE Chief Executive
Xavier Rolet, who will retire if the deal goes ahead, sought to ease
concerns that large swathes of IT operations would shift from London
to Frankfurt, saying there would be a "balanced" distribution
between the two.
Industry analysts say the combined group could face challenges from
the EU's competition regulator over its huge presence in derivatives
clearing.
Kengeter said he expected a thorough review by regulators and talks
has already begun with them.
"We feel confident about the process," Kengeter said.
LSE Group, which was created in 2007 when London Stock Exchange
merged with Milan stock exchange Borsa Italiana, said its
shareholders would receive a dividend of 25.2 pence per LSEGshare
for the six month period ended Dec. 31. ($1 = 0.9016 euros)
(Additional reporting by Noor Zainab Hussain and Arno Schuetze;
Editing by Maria Sheahan and Alexander Smith)
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