Brexit could scupper Deutsche Borse merger with London Stock Exchange

Deutsche Borse, the Frankfurt Stock Exchange operator, warned that its proposed merger deal with the London Stock Exchange Group (LSE) could be scuppered in the event of a Brexit.

The German-based group, which on 23 February revealed it had agreed a deal with the LSE to create a European global markets infrastructure group, said the merged company would be headquartered in London but the plan could be jeopardised if Britain votes in favour of leaving the European Union. "The potential merger would be structured as an all-share merger of equals under a new UK holding company," Deutsche Borse said in a statement on 26 February.

"It is recognised that a decision by the United Kingdom electorate to leave the European Union (a 'Leave Decision') would put the project at risk."

The statement added the newly-formed company would be listed on both the London and Frankfurt stock exchanges and retain headquarters in both cities "with an efficient distribution of corporate functions in both locations." LSE and Deutsche Boerse would become intermediate subsidiaries of the combined group and the existing regulatory framework would remain unchanged, subject to customary and final regulatory approvals, the German group said, adding the combined company shares would be eligible for inclusion" in the blue-chip stock indices, EuroStoxx, DAX and FTSE.

Upon completion of the merger, LSE chairman Donald Brydon would become chairman of the combined group, while Deutsche Boerse's chief executive Carsten Kangeter would assume the role of CEO of newly-formed company and LSE's finance chief David Warren would be chief financial officer.

Speaking at the G20 meeting in Shanghai on 26 February, the Chancellor George Osborne warned leaving the EU would have some drastic effects on Britain's economy. "You've seen the value of the pound fall and it reminds us all that this is not some political parlour game," he said in an interview with BBC News.

"This is about people's jobs and their livelihoods and their living standards and in my judgement, as chancellor, leaving the EU would represent a profound economic shock for our country."

Osborne's words would have come as welcome support for David Cameron, after the Prime Minister saw a number of senior Tory figures, including Boris Johnson, Michael Gove and Michael Howard back the leave campaign.