The world’s largest financial exchange is looking to gatecrash the £20bn merger of the London Stock Exchange and rival Deutsche Börse.
The American owner of the Chicago Mercantile Exchange (CME) has looked over both LSE and its suitor in recent months. It is understood to view Deutsche Börse as the more attractive target.
The UK and German operators have become takeover targets since unveiling their proposed alliance two weeks ago. The tie-up would create a European trading powerhouse to rival the financial might of the CME, which has a market value of £22.5bn.
Under the proposed deal, the enlarged group would be based in London and run by Carsten Kengeter, boss of Deutsche Börse. LSE’s long-serving chief executive, Xavier Rolet, would step down.
The merger talks have spurred American rivals into action. Intercontinental Exchange (ICE), owner of the New York Stock Exchange, is working on a bid for the LSE. It has drafted in investment banks Morgan Stanley and Moelis, and is expected to table a counter-offer by the end of the month.
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CME has long considered Deutsche Börse an attractive takeover target, and made a tentative approach just over three years ago. Should ICE succeed with an offer for the LSE, CME is expected to rekindle its interest in the German exchange.
CME is unlikely to fight ICE for LSE, according to bankers.
The Chicago giant has also held talks with banks, but has been dealt a blow as some of its closest partners, including Barclays, are acting for LSE.
The London exchange has brought in seven investment banks — including boutique advisory firm Robey Warshaw and Wall Street giant Goldman Sachs — in the hope of preventing advisers from joining a rival bid.
Deutsche Börse has signed up four heavyweight advisers, including Deutsche Bank.
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The American interest comes as LSE and Deutsche Börse put the finishing touches to a union. The deal has been labelled as a merger but Deutsche Börse investors will end up with a majority stake in the enlarged group — although only a small premium has been offered to LSE investors.
Shareholders are reserving judgment until more detailed terms are published. City sources have estimated that LSE and Deutsche Börse could save 15% on their combined revenues, which would mean about £400m of costs being cut. The details could be revealed as early as this week.
LSE announced full-year results on Friday, showing an adjusted pre-tax profit of £643m, up 31% on the previous year. Rolet said the Deutsche Börse merger “represents a compelling opportunity to strengthen each other in an industry-defining combination”.