The Americans have come gatecrashing one of Europe’s most important parties, with the owners of the New York Stock Exchange and the Chicago Mercantile Exchange considering bids for the London Stock Exchange.
The offers, if they materialise, could derail the LSE’s proposed “merger of equals” with Deutsche Börse, announced last week in an attempt to create a European powerhouse to rival the two leading US exchanges.
New of the Americans’ interest propelled LSE shares 7 per cent higher yesterday. It throws open the prospect of a high-stakes race for control of the four remaining big western exchanges, which could flush out other bidders, including from Asia.
Intercontinental Exchange, owner of the New York Stock Exchange, confirmed in a statement yesterday that it was “considering making an offer” for the LSE, although no approach had been made and “no decision has yet been made as to whether to pursue such an offer”.
The statement added that “there can be no certainty that any offer will be made” and that a further announcement would be made as appropriate.
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CME, which made no statement, is also considering whether to mount its own bid, according to reports in The Wall Street Journal and Bloomberg. One possible scenario if ICE does make a firm bid for the LSE might be for the Chicago Mercantile Exchange to bid for Deutsche Börse, one person familiar with the matter suggested last night.
ICE, the world’s second-biggest exchange with a market value of $29 billion, controls the London International Financial Futures and Options Exchange and its interest in the LSE came as no surprise.
The LSE has rejected two previous takeover attempts by Deutsche Börse since 2000, as well as a slew of offers from other international financial groups. Acquiring it would give ICE, or any other bidder, control of LCH.Clearnet, which has been controlled by the LSE since 2013 and is the world’s largest clearer of interest rate swaps.
It is an asset that the CME, the world’s biggest exchange with a market value of more than $31 billion, may also be keen to acquire, although it may have more interest in Deutsche Börse and its strong derivatives market.
The Hong Kong Stock Exchange, with a market capitalisation of more than $26 billion, acquired the London Metal Exchange for $2.2 billion in 2012 and could be interested in expanding its European footprint.
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The LSE noted ICE’s interest, adding that “there can be no certainty that an offer will be made or as to the terms on which any offer might be made”.
Kyle Voight, a Keefe, Bruyette & Woods analyst, said that the LSE would be a good strategic fit for ICE, although it had a limited ability to fund a deal through debt. In October, ICE acquired Interactive Data Holdings for $5.2 billion.
Any change of ownership would need clearance from antitrust authorities and state and local regulators. In New York, shares in ICE fell by 3 per cent and CME stock was up by 1 per cent. In Frankfurt, Deutsche Börse shares closed 1 per cent higher.