London Stock Exchange merger with Deutsche Boerse in doubt

The €29 billion (£24.5 billion) merger of the Deutsche Boerse (ETR:DB1) and London Stock Exchange (LON:LSE) is likely to collapse after the LSE announced it was unlikely to be approved by the European Commission.

The European Commission ordered LSE to 60 percent of its stake in the fixed-trading platform, MTS. The stock exchange said this was a “disproportionate” request.

MTS is a small part of LSE’s business but it is a major platform for trading European government bonds, particularly in Italy, and is considered by the company to be “systemically important”.

This is the third time the pair have tried to merge, with two previous attempts in 2000 and 2005 ending in failure. The most recent attempt began about a year ago.

“The LSE board believes it is highly unlikely that a sale of MTS could be satisfactorily achieved, even if LSE were to give the commitment. Moreover, the board believes the offer of such a remedy would jeopardise it’s critically important relationships with these regulators [in Italy] and be detrimental to our ongoing businesses in Italy and the combined group, were the merger to complete.” said the LSE late on Sunday.

“Based on the commission’s current position, the London Stock Exchange believes that the commission is unlikely to provide clearance for the merger,” it added.

The LSE said it was acting “in the best interests of shareholders” and does not plan on submitting an alternative proposal with regards to MTS.

The planned “merger of equals” was criticised by politicians from both countries, as well as those in Portugal and The Netherlands who were fearful for their own stock exchanges, owned by Euronext.

The proposed merger was also put in doubt by Britain’s referendum vote last year to leave the EU.

Shares in both companies fell on Monday, with Deutsche Börse down almost 5 percent and London Stock Exchange falling by 3 percent.

European competition authorities will rule on the tie-up before April 3.