'Foundation' laid for Deutsche Börse-LSE Group merger

The holding company created for Deutsche Börse’s planned merger with the London Stock Exchange Group comes in the form of a Dutch legal vehicle typically used to thwart rival takeovers.

The London Stock Exchange building in the City of London


The entity, called Stichting HLDCO123, was created on March 7, according to a regulatory filing. Lisa Condron, the LSE Group’s company secretary, and Marcus Lehmann, Deutsche Börse’s head of corporate strategy, are its only two named directors, according to a Dutch filing.

Stichting, which means “foundations” in Dutch, increasingly have become a useful tool used by multinational firms to protect themselves against a range of factors, including hostile takeovers. The entities don’t have any legal owners, and therefore can veto any potential takeovers and shift assets outside the reach of rivals and shareholders.

Rivals or governments can’t claim ownership or take over assets under a stichting, and therefore the stichting can veto any potential takeovers and shift assets outside the reach of rivals. The board of the new entity has total control over any assets under the stichting.

Deutsche Börse is currently in talks to merge with LSE and must formally announce merger plans by March 22. An offer could be announced this week, according to people familiar with the matter.

The holding company for the combined entity is to be based in London and regulated by U.K. authorities.

Dutch drug company Mylan used a stichting last year in an attempt to fend off a $ 40 billion bid from rival Teva Pharmaceutical Industries. Teva withdrew its bid, after agreeing to buy Allergan’s generic-drugs business.

The exchange sector is currently the center of heated M&A activity. US rival Intercontinental Exchange Inc. is considering making an offer for LSE, while Chicago’s CME Group is also considering its options, WSJ previously reported.

European stock exchange Euronext is also considering potential acquisition opportunities stemming from the potential merger between the London Stock Exchange and Deutsche Börse, according to two people familiar with the matter.

Deutsche Börse has previous experience with stichtings. The German exchange had lined up a merger with NYSE Euronext in 2012. The deal was blocked by the European commission over competition concerns.

The two exchanges created a stichting holding company to “safeguard” the two exchanges from “unsolicited” attempts at a change in control, or a change in management, according to the documents filed at the time.

–Write to Giles Turner at giles.turner@wsj.com and tcave@efinancialnews.com

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