The European Commission has formally blocked the proposed merger between The London Stock Exchange Group plc (LNSTY) and the Deutsche Boerse AG (DBOEY) Wednesday, saying the €29 billion ($30 billion) tie-up would have created a monopoly in fixed income clearing markets.
"The European economy depends on well-functioning financial markets. That is not just important for banks and other financial institutions. The whole economy benefits when businesses can raise money on competitive financial markets." said Competition Commissioner Margrethe Vestager, adding the merger "would have significantly reduced competition by creating a de facto monopoly in the crucial area of clearing of fixed income instruments."
LSE shares surged to the top of the FTSE 100 following the news, however, rising 3.55% to change hands at 3,128.9 pence each after it said it would pay a special dividend linked to the merger and launch a £200 million share buyback, "an amount broadly equivalent to the return it would have made had the merger with Deutsche Borse proceeded as planned," the company said.
The LSE also said it would be "actively engaged in exploring selective inorganic and ongoing organic investment in order to drive further growth and will continue to consider opportunities for further capital returns in line with its capital allocation framework."
Deutsche Boerse shares also gained, rising 1.4% in Frankfurt to change hands at €82.57 each.
"The prohibition is a setback for Europe, the Capital Markets Union and the bridge between continental Europe and Great Britain," said Deutsche Boerse supervisory board chairman Joachim Faber. "A rare opportunity to create a global market infrastructure provider based in Europe and to strengthen the global competitiveness of Europe's financial markets has been missed."
