Deals Still on the Table

Terry Flanagan

While the focus has been on the exchange mergers that have failed to close, there are still several key deals up in the air.

London clearing house LCH.Clearnet has been in exclusive talks with the London Stock Exchange since the fall of last year. In a recent announcement, the clearer said it plans to make an announcement “shortly” regarding the results of those discussions. It is widely expected that it will announce a deal in which the LSE will take a majority stake of at least 51%. LCH.Clearnet is currently 83% owned by clients and 17% owned by exchanges.

“This is definitely the most logical move for the LSE, it lets them expand vertically through the trading cycle,” said Simmy Grewal, exchange European exchange analyst with Aite Group. “You can see them evolving their business. People talk heavily about market share falling with the LSE, but they only make about 15% to 16% of their overall revenue from trading. Having LCH and creating a clearing capacity is definitely a step to widen the spectrum of products they offer as a group. This is a positive move for the LSE.”

Another key target still available is the London Metal Exchange, the world’s largest metal exchange. The LME announced late last year that it had received several takeover approaches. Bids are due to be in by around mid-February, and the LME plans to present a list of possible buyers to board members by the end of the month. Among the potential bidders are CME Group, the world’s largest derivatives exchange, as well as the IntercontinentalExchange, the Singapore Exchange and the LSE.

While there has been no new information in the last several months regarding the LME, there remain several exchanges considering potential offers, according to Richard Perrott of Berenberg Bank.

With more than $30 billion in exchange deals failing to close over the past year, many are looking toward other means of growth aside from large-scale mergers. NYSE Euronext and Deutsche Borse, which had their own $17 billion deal rejected earlier this month, will both be looking at internal growth in addition to smaller, bolt-on type acquisitions.

Related articles