EU Opens In-Depth Review of Deutsche Börse, London Stock Exchange Merger --2nd Update
September 28 2016 - 1:46PM
Dow Jones News
By Natalia Drozdiak
BRUSSELS -- The European Union's antitrust regulator opened an
investigation on Wednesday into the proposed merger of Deutsche
Börse AG and London Stock Exchange Group PLC, citing concerns that
the deal could reduce competition in a number of financial
markets.
The European Commission said the merger could affect clearing
functions, derivatives, repurchasing agreements, German stocks and
exchange-traded products and that it would create the largest
European-exchange operator "by far."
"Financial markets provide an essential function for the
European economy. We must ensure that market participants continue
to have access to financial-market infrastructure on competitive
terms," EU antitrust chief Margrethe Vestager said.
The LSE said it would try to head off some competition concerns
by exploring the sale of its clearing unit, LCH SA. It said any
sale of the unit would be subject to the merger with Deutsche Börse
going ahead.
The commission said it was concerned the combination of both
companies' clearing houses could hurt competing trading platforms
that depend on LSE's clearing house. It would create the largest
collateral pool in the world, at around EUR150 billion ($168
billion), used to guard against risk when clearing transactions,
the EU noted.
In merger reviews, the commission tends to prefer structural
remedies, like selling assets, to ease concerns. But a French
official has previously said the sale of the LSE's French
clearinghouse would still fall far from what is necessary to ease
France's concerns about the deal.
The EU's in-depth probe comes on the heels of warnings raised by
various European ministers. French Finance Minister Michel Sapin
has said the deal would curtail competition and create extra risk,
while Belgian Finance Minister Johan Van Overtveldt wrote Ms.
Vestager a letter warning about the impact the deal would have on
the financial stability of both the European and Belgian economies.
The Paris Bourse and the Brussels Stock Exchange are both part of
the stock exchange NYSE Euronext that rivals Deutsche Börse and
LSE.
In its statement Wednesday, the commission said it was also
looking at the merger's effect on clearing for repurchasing
agreements as well as derivatives, where in many cases the parties
are direct competitors. In addition, the EU said it would
scrutinize the deal's effect on German stocks since the merger
would combine two of the three largest trading platforms for
German-listed equities.
In-depth merger reviews by the EU are common in large, complex
deals. The commission can seek concessions from the parties, or if
they fail to assuage the EU's concerns it could block the deal.
The European Commission blocked a deal between Deutsche Börse
and NYSE Euronext in 2012 on fears it would create a quasimonopoly
in European derivatives traded on exchanges.
A Deutsche Börse spokesman said the in-depth probe was
"expected," adding that the parties "continue the constructive
dialogue and cooperation with the EU competition authority."
The commission has until Feb. 13, 2017, to reach a decision,
though the deadline could still be extended. Deutsche Börse and LSE
will subsequently also have to get clearance from the local German
government of Hesse.
Deutsche Boerse says it expects the deal to close some time in
the second quarter of next year.
--Ulrike Dauer in Frankfurt contributed to this article.
Write to Natalia Drozdiak at natalia.drozdiak@wsj.com
(END) Dow Jones Newswires
September 28, 2016 13:31 ET (17:31 GMT)
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