Deutsche Börse-LSE merger backed by influential proxy firms

The proposed $ 30 billion merger of Deutsche Börse and London Stock Exchange Group has won backing from two influential shareholder advisory services, even if Britain votes to exit the European Union.

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The UK exchange operator is trying to merge with its German rival

Institutional Shareholder Services and Glass Lewis have in recent days sent notices to LSE investors supporting the deal, asserting that the stock exchange operators are a good fit. The recommendations by ISS and Glass Lewis are significant because LSE needs 75% of its shareholder base to approve the transaction at a meeting on July 4.

Glass Lewis said in a statement sent on June 21: “We consider the strategic underpinnings [of the merger as] relatively straightforward”. It added that LSE investors shouldn’t base their vote on the uncertainties associated with the Brexit referendum on June 23.

ISS on June 24 urged LSE investors to support the transaction because the “rationale to merge to create the largest exchange group by income is compelling”. The proxy adviser added the transaction offers LSE investors a premium of roughly 8% to its standalone valuation.

Although the two recommendations are positive for the merger, obstacles remain, particularly if the UK population votes to leave the EU, say bankers, politicians and regulators.

The advisory statements were sent to LSE shareholders in preparation for the July shareholder meeting. Deutsche Börse isn’t holding a shareholder meeting over the transaction, so Glass Lewis and ISS are unlikely to publish recommendations for the German side.

The proposed merger is being structured through a new holding company, to be based in London, that would own both exchanges. Earlier in June, it launched a tender offer for Deutsche Börse shares that ends July 12. A successful offer hinges on acceptance by at least 75% of Deutsche Börse shares.

LSE’s acceptance requires approval on July 4 of at least 75% of its shareholder base.

Write to Eyk Henning at

This story was first published by The Wall Street Journal

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