London Stock Exchange in £20bn Frankfurt merger talks

The London Stock Exchange (LSE) and its arch-rival in Frankfurt are in talks over a potential £20 billion merger to create a pan-European equities powerhouse.

A bull statue stands in front of the Frankfurt market as its owner holds merger talks with the LSE. Picture: AP Photo/Michael Probst

The London exchange and Deutsche Boerse said they were holding “detailed discussions” about a deal that would spawn a “leading European-based global markets infrastructure group”.

The LSE said the potential terms were for an all-share merger, which would see its shareholders end up with 45.6 per cent of the combined group and Deutsche Boerse the majority 54.4 per cent.

Shares in FTSE 100-listed LSE leapt on the announcement, although the stock had already surged recently amid speculation over a possible transaction.

Broker Edison said in a note: “A merger would create a European champion in the market infrastructure and capital markets business to rival the two large US firms and the Hong Kong Exchange in terms of market capitalisation.”

The talks mark the latest attempt at a merger between the two exchanges after proposed deals collapsed in 2000, and again in 2004-05. It comes at a sensitive time politically as the debate on a European Union (EU) Brexit gains political momentum following David Cameron’s negotiations with the European Commission (EC).

Euro-sceptics have argued that the EC has tried to undermine London’s stock market and currencies predominance through initiatives such as the banker bonus cap and financial transaction tax. London’s equities, bonds and forex trading exceeds the rest of the EU combined.

All key businesses of LSE and Deutsche Boerse would continue under their current brand names and it would have a single board made up of an equal number of directors from the two firms.

The LSE said discussions remain ongoing over the other terms and conditions of the deal, which is subject to due diligence. “The potential merger would represent a compelling opportunity for both companies to strengthen each other in an industry-defining combination, creating a leading European-based global markets infrastructure group,” it said.

Informal British stock trading began in the late 17th century in coffee houses around Lombard Street in the City of London, with the London Stock Exchange being founded in 1801.