The boss of the London Stock Exchange, which has agreed a £21bn merger with Deutsche Börse, has insisted that the merged company will be based in London and said “good progress” was being made on the deal, despite the UK’s vote to leave the EU.
The referendum result has cast doubt over the merger, which has been approved by shareholders from both companies. Under the terms of the deal, the combined firm will be domiciled in Britain, with head offices in Frankfurt and London, but German politicians and regulators have questioned the London base, and whether the merger should go ahead at all.
Xavier Rolet, the LSE’s chief executive, said: “The deal isn’t subject to change. Its terms are set. The top co will be in the UK.”
He expects the deal to be completed in the first or second quarter of next year, with both companies focused on gaining approval from regulators in 40 jurisdictions around the world. Rolet noted that the board of the merged company would be made up of six non-executive directors from both sides, and any substantive changes would require a 75% majority.
Rolet is due to leave once the merger is complete. The LSE’s chairman, Donald Brydon, who is to chair the combined group, has hinted that there could be changes to its structure before the UK formally leaves the EU.
Deutsche Börse’s chief executive, Carsten Kengeter, is to run the combined group. He has reportedly floated the idea of setting up a dual holding company after the merger to appease German regulators.
Rolet said it was in the EU’s interest to give Britain access to the single market. “The cost would be very high not just for the UK but also for the rest of the EU. We’d be going to fragmentation, small liquidity pools, added cost.”
He argued that European industry would lose out hugely if it did not have access to London’s “first-class financial services” when it needed to raise money. The UK accounts for two-thirds of the EU’s financial services.
Rolet was also confident that the merged business would hold on to euro clearing, despite opposition from German and French politicians and regulators, who say euro-denominated trades should not be cleared outside the currency bloc. The UK won a court ruling last year to protect its right to clear euro trades, against protests from the European Central Bank, which regulates the currency.
Rolet said the ECB had no regulatory powers over clearing euros and to change this would require EU treaty change. “That’s not impossible but at this time there is no immediate threat.”
His comments came as the LSE reported a 9% rise to 722m for the six months to June, while adjusted operating profit was also up 9%, to £333m.
The LSE has spent £55m in advisory fees on the merger so far. The company and its Frankfurt counterpart announced plans for a “merger of equals” this year after two previous failed attempts.
This article was written by Julia Kollewe, for theguardian.com on Thursday 4th August 2016 10.48 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010