London Stock Exchange and Deutsche Boerse agree on merger as Brexit vote looms

London Stock Exchange Group and Deutsche Boerse have agreed on a merger of equals to create a European global markets infrastructure group.

In a statement released on Wednesday (16 March) the two firms said the all-share merger "brings together London, a leading global financial centre and Frankfurt, the home of the ECB and access point to Europe's largest economy, in an industry-defining combination."

Under the agreed merger, Deutsche Boerse's shareholders would hold 54.4% of the new company, while LSE shareholders would hold the remaining 45.6%. The firms said they expect to save approximately €450m (£354m, $499m) each year once the deal is completed.

"The merger would be expected to optimise fully and benefit from the potential of the Capital Markets Union project," the two companies said in a joint statement. "It is recognised that a decision by the United Kingdom electorate to leave the European Union would put the Capital Markets Union project at risk."

The newly-form group will, in all likelihood, move to the top ranks of exchange operators, alongside the likes of CME Group, Intercontinental Exchange and Hong Kong Exchanges & Clearing. The Anglo-German group, which will bring the Euro Stoxx 50 Index, the FTSE 100 Index and the DAX Index all under one roof, will have a strong platform in Europe and could subsequently expand into both Asia and the US.

However, the merger is also likely to be met by concerns that it could prove detrimental for competition, while other major exchange companies might attempt to derail it by submitting fresh bids. Intercontinental Exchange, the owner of the New York Stock Exchange, revealed on 1 March that it was contemplating making a higher offer for LSE.

LSE and Deutsche Boerse had previously attempted to merge in 2000, and again in 2004. On 23 February they revealed plans to open negotiations to form a stronger stock exchange.