Big Deutsche Börse shareholder backs LSE merger

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Alexander Darwall, a fund manager at Jupiter Asset Management, a top-five shareholder in Deutsche Börse, said the deal “succeeds in delivering efficiency and scale so that savings can be passed on to customers”.

He added the deal gave Europe “a really good opportunity” to compete on a global scale and that it was “more important as much of the European banking system is under strain”.

His comments came a day after the LSE’s shareholders voted overwhelmingly in favour of the deal.

However, the UK’s June 23 vote to end its membership of the EU created fresh doubts about whether the merger could be completed on its existing terms. Of particular concern to German regulators is the location of the combined group’s holding company, which the two exchanges have said will be London.

Germany’s financial regulator BaFin has already said it opposes a London headquarters. Felix Hufeld, Bafin’s president, said on June 28 that “without doubt… it is hard to imagine that the most important exchange venue in the eurozone would be steered from a headquarters outside the EU”.

But Darwall said: “I do not care, from an emotional point of view where the [holding company] of the company is headquartered. I do not want the deal to be changed and risk losing it altogether.

“This deal should not be about political sensibilities. It should be first and foremost about meeting customers’ needs.”

BaFin is one of 20 regulators – along with others in the US, Russia and Singapore – that needs to approve the deal.

One solution for gaining approval in the post-Brexit world could involve setting up two holding companies, one in London and one in Frankfurt, that would control the joint operating businesses, according to a person familiar with the matter.

On July 5, Deutsche Börse’s supervisory board responded to result of the LSE shareholder vote in a statement in which Joachim Faber, chairman of the supervisory board, said: “I strongly endorse the statement of London Stock Exchange Group following their general meeting and continue to recommend the transaction to the shareholders of Deutsche Börse.”

The German exchange operator said the deal’s terms included mechanisms to respond to the referendum outcome. A joint LSE/Deutsche Börse referendum committee had been working on issues related to the vote before June 23 and will continue to do so, Deutsche Börse said.

Deutsche Börse’s shareholders have until July 12 to tender their shares in the deal and indicate whether or not they back the merger.

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