The London Stock Exchange said a merger with its Frankfurt rival Deutsche Börse would be “compelling”, as it reported a 31% rise in profits for 2015.
The LSE’s annual results showed profit before tax, stripping out one-off items, rose to £643.4m, from £491.7m in 2014. Including exceptional items, profits climbed to £336.1m from £182.1m. Revenues surged 78% to £2.3bn. The company raised its dividend for 2015 by 20% to 36p a share.
The results did not mention ICE, the owner of the New York Stock Exchange, which this week revealed it was pondering a potential counterbid.
The LSE and Deutsche Börse said on 23 February that they were in talks to seal a £20bn deal, described as a “merger of equals” under which their key businesses would retain their brand names. The new holding company would be based in London. It is their third attempt at a tie-up in 16 years, and would create the third-largest exchange operator in the world.
Michael Hewson, analyst at CMC Markets, said: “Given these results it’s not hard to see why Deutsche Börse and ICE are both interested and the fact that London is the centre of the European IPO market, where we’ve seen 72% of the overall IPO activity in the last 12 months.
“London’s appeal as a centre for private equity and hedge funds makes the overall task of raising capital that much simpler in a very confined geographical location, and while some have cited the upcoming Brexit referendum as a risk to London’s status, it’s not immediately apparent that it would undermine any deal.”
He added: “In particular the LSE’s clearing business LCH.Clearnet is the main draw, though any successful bid may see any suitor offload the stakes in Borsa Italia and the French part of the Clearnet business.”
The LSE said on Friday that discussions were “ongoing regarding the other terms and conditions of the potential merger”.
The LSE’s chief executive, Xavier Rolet, described the planned tie-up as a “compelling opportunity to strengthen each other in an industry-defining combination, by creating a global market infrastructure group with significant benefits for our customers and shareholders”.
Rolet is expected to depart after seven years at the helm if the deal with the Frankfurt exchange goes ahead. The merged trading giant is likely to be led by his Deutsche Börse counterpart Carsten Kengeter, and chaired by Donald Brydon, chairman of the LSE.
Joshua Raymond, market analyst at online trading firm XTB.com, said: “It’s been a solid year for the LSE. The focus of course now is whether a rival bid emerges from ICE that could spark a bidding war, or if the firms major shareholders remain convinced a tie up with Deutsche Börse on the already announced conditions is the best way forward for the trading house.”
This article was written by Julia Kollewe, for theguardian.com on Friday 4th March 2016 08.56 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010