Owner of New York Stock Exchange, Intercontinental Exchange prepare its bidding on London Stock Exchange. The bid came amidst merger talk between London Stock Exchange and Deutsche Boerse, which may be disrupted by Brexit issue.
London Stock Exchange (LSE) and Frankfurt-based Deutsche Boerse have been trying to merge for 16 years. According to The Guardian, this was their third attempt in a £20 billion ($28.3 billion) deal to combine trading operation between LSE and German exchange's Eurex derivatives business. If the merger is successful, it will create the third world-largest exchange operator in terms of stock market value.
In the midst of the talk, Intercontinental Exchange (ICE) on Tuesday said to make offer for LSE. ICE is the owner of New York Stock Exchange. However, Intercontinental Exchange had not made any approach to LSE and it also had not decided to continue the offer.
Following the announcement from ICE, shares in London Stock Exchange jumped to nearly 9%.
Bloomberg reported that CME Group, owner of New York Mercantile Exchange and Commodity Exchange has also interest to make an offer. The deal will have the potential to scramble the industry, as all parties related are four of top-five exchanges in the world.
Merger between LSE and Deutsche Boerse will create a strong contender to challenge CME and its $32 billion market valuation. Irish Times reported the combination between London Stock Exchange and CME will create a company in a similar scale with Intercontinental Exchange.
While if ICE win, combination between LSE and NYSE will put a more than $10 billion in market cap between ICE and CME. Whereas for CME, winning the bid will give it a commanding presence in Europe.
Analyst at Morningstar Inc. in Chicago Michael Wong told Bloomberg regarding the bidding war, "I can see it being contentious. Everyone has something to gain, and arguably they'll be blocked from stronger competitive positioning if they're not the acquirer of LSE."
Nevertheless, Brexit issue might have been disrupting factor for merger between Boerse and LSE. Those who win the bid will have control over the biggest equities exchange in Europe.
One issue which could hinder the merger is regulatory approval. Previously, regulators in European Union blocked the planned merger between NYSE Euronext and Deutsche Boerse in 2012. That deal was vetored due to possibility of creating a near monopoly in European exchange-traded derivatives. Wong predicted, European regulators may act differently with Deutsche Boerse and LSE merger, because it would connect London market to European
Intercontinental Exchange prepare its arsenal to place a bid on London Stock Exchange. Meanwhile, London Stock Exchange and Deutsche Boerse are in the middle of their third merger negotiation in 16 years.
Join the Conversation