Competition Commission renews debate over LSE takeover |
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Sat, 30 Jul 2005 03:05
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LONDON: It’s hardly been four months since the London Stock Exchange survived a takeover bid by German rivals Deutsche Börse and Euronext. The Competition Commission has chosen to reawaken the debate on the feasibility of the proposed takeover bids by saying that both the bids would seriously affect fair competition.
Speaking out on the issue for the first time after the bids were referred to it in March, the Competition Commission said in a statement, "Either merger would make it more difficult for other exchanges to compete with the LSE in trading UK equities because of both bidders' ownership or control over the future provision of clearing services to the LSE." The clearing services happen to be vital systems for "clearing share and derivatives trades carried out on an international exchange." The Deutsche Börse owns Eurex Clearing, while Euronext has a majority share in LCH.Clearnet, which is the LSE clearer at the moment.
The Commission's objection stems from the fear that both the clearing services would close the door on other clearers who could offer their services to LSE's customers at competitive prices.
The Commission further stated that it would like to hear the views of both parties on how they would overcome this hurdle. Even while appearing fair on the surface this statement by the commission gives some cause for cheer for the German bidder. Because it clearly stated that it has no objection to Clearstream, the settlement wing of the Börse. Analysts were of the opinion that had the commission wanted to pull up both bidders, it would have objected to the ownership of Clearstream. By not doing so, the Commission has inadvertently put the Börse on an equal footing with Euronext.
It may be recalled that chief executive Werner Seifert was the sacrificial lamb last time around when the German exchange had bid £1.3 billion for the LSE. It was mainly because of shareholders' rejection that Börse was forced to withdraw its bid. It is not clear if the shareholders' attitude has undergone any drastic change now. However, it would make for an interesting situation to see how they react to the commission's statement.
The German Exchange issued a statement saying, "Deutsche Börse has welcomed the provisional findings relating to a possible offer for the London Stock Exchange issued by the Competition Commission and in particular the fact that the position of Deutsche Börse and Euronext from a competition law perspective is considered identical. Deutsche Börse sees itself in a favorable position with regard to potential remedies suggested by the Commission: The Commission’s concerns are solely related to clearing services for UK equities."
In anticipation of a juicy battle, LSE shares soared by 16.25p to 531.25p, a 3 percent gain.
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