Deutsche Börse considers move to get LSE deal over the line

That unexpected move would be the strongest sign yet of how committed both companies are to their tie-up despite mounting questions following the UK’s vote to leave the European Union.

The German exchange group is concerned that the tender offer that has been launched for its shares as part of the deal could fail to secure more than 75% of its stock by the Tuesday deadline, according to the people. Deutsche Börse is therefore considering lowering the minimum threshold to around 60%, they said.

Some large Deutsche Börse shareholders privately said they understood the strategic rationale of the combination but were hesitant to tender because they were uncertain about how Brexit may affect the transaction. As of Friday, around 25% of the shares had been tendered.

The issue is pressing because the deal would fall apart should sufficient shares not be tendered.

A final decision on whether to lower the minimum threshold will be made Monday morning, the people close to the deal said.

Acquirers in Germany are free to choose a minimum acceptance hurdle on which a tender offer hinges, but most choose a 75% threshold because it gives wide-ranging control over a target under German law.

People familiar with the matter said Deutsche Börse is optimistic it can win over holders of more than 75% of its shares in the so-called extended offer period, which starts once enough shares have been secured in the initial offer period. Those people added that both Deutsche Börse and LSE are optimistic they can realize the announced synergies of €700 million despite a potentially lower acceptance level on the German side.

The so-far low response rate from Deutsche Börse investors is in stark contrast to the response LSE received from its shareholders. More than 99% of its shareholder base voted in favor of the deal at a special meeting last Monday.

Industry observers have said the drop in the pound and potentially lower trading volumes on the LSE after Brexit have shifted the benefits of the merger toward LSE.

Complicating a successful completion of the tender offer is Deutsche Börse’s investor base. Around 14% of its shares are held by index tracking funds that generally tender their stake only in the two-week extended offer period that starts following a successful initial offer period.

Completion of the offer would get the exchange merger into the next stage, where it needs to get regulatory approval from antitrust authorities, local watchdogs and governments.

Germany’s financial regulator, BaFin, has already said it opposes the current plan, under which London would become headquarters for the holding company of the combined operations. 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.”

Many politicians in the ruling coalition in Hesse, where Frankfurt is located, tend to agree and some have vowed publicly to move the holding company to Frankfurt.

But Germany’s powerful finance minister, Wolfgang Schäuble, last week said “the question of the holding’s headquarters is not the most important question.” He added that it was more important to see which business fields will remain in Frankfurt and which in London. “I believe that it’s indeed important that the responsible authorities have a close look at this,” he said.

One of the largest investors in Deutsche Börse has come out in support of its merger last week, saying the deal shouldn’t be torpedoed because of “political sensibilities” surrounding a UK exit from Europe. Alexander Darwall, a fund manager at Jupiter Asset Management, said the deal “succeeds in delivering efficiency and scale so that savings can be passed on to customers.”

Write to Eyk Henning at

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