Börse/LSE tie-up raises regulatory concerns
As Europe’s two largest financial market operators, the London Stock Exchange (LSE) and Deutsche Börse, begin their third attempt at a tie-up, concerns have been raised over antitrust issues.
Magic Circle duo Freshfields Bruckhaus Deringer and Linklaters have both won roles almost 16 years after the first attempt to merge. Last month the LSE and Deutsche Börse agreed their terms for a merger of equals that is set to create one of the largest exchange companies in the world, with a combined value of about £21bn. Under the terms of the deal, LSE shareholders will own 45.6% of the new holding company, while Deutsche Börse shareholders will own 54.4%.
Freshfields partners Andrew Hutchings, Mark Rawlinson and London M&A co-head Piers Prichard Jones led the team representing LSE, while Linklaters corporate partner Roger Barron acted for Deutsche Börse, along with Simon Branigan in London and Ralph Wollburg and Staffan Illert in Germany.
The combined group plans to maintain its headquarters in London and Frankfurt, but the announcement has raised wider competition concerns. ‘The merger could lead to a loss of competition and increases the risk of monopoly pricing power being shifted to the EU,’ said one London-based corporate partner.
Already Deutsche Börse has spun off its US options exchange operator International Securities Exchange. Allen & Overy (A&O) acted opposite Wachtell, Lipton, Rosen & Katz on the sale of International Securities Exchange to Wachtell client Nasdaq for more than $1.1bn.
A&O’s team was led by New York M&A partner Peter Harwich, with support from Frankfurt partner Hartmut Krause. Other advisers from the firm’s New York office include tax partner Jack Heinberg and US head of antitrust Elaine Johnston.
Wachtell’s advice for Nasdaq was led by corporate partner David Lam, while Nasdaq also turned to Jones Day for regulatory advice.
Another corporate partner noted that while the merger has been confirmed there will be a host of problems to solve, such as the regulatory and antitrust issues which will involve a number of authorities such as the UK’s Financial Conduct Authority and Germany’s BaFin (Federal Financial Supervisory Authority).
Others have cited the Brexit debate as an issue and questioned the impact the UK exiting the EU would have on the merger, and whether European regulators would allow euro-denominated transactions to take place outside the eurozone.
jaishree.kalia@legalease.co.uk