There is growing concern in Germany that the “merger of equals” between Deutsche Börse and the London Stock Exchange could turn out to be harmful for the German financial centre of Frankfurt.
The reaction in the UK to the proposed £20bn union has been one of trepidation at the potential impact on the City of London since Deutsche Börse shareholders will own 54.4 per cent of the new company and Carsten Kengeter, the Börse’s chief executive, would head up the new group. There are also fears that a merger would make Frankfurt the centre for the important “clearing” trade of derivatives.
But some in Germany are arguing that, in fact, London would have the advantage in the wake of the merger because the new group’s main base would be registered in the City.
“The supposed parity – the boss here, the domicile there – creates a recognisably lopsided Frankfurt,” Manfred Zass, a former Deutsche Börse director, told a German magazine last week. He added: “We should not be naïve… With respect, if you know the push and pull behind such a merger, it sounds more like an investment-banker fairy story.”
Local politicians have also been critical of the planned relocation of the headquarters. Wilhelm Speckhardt, former mayor of the Frankfurt suburb of Eschborn, described the plan as “an unimaginable catastrophe for the town”.
Ulrich Caspar, who sits in the regional parliament in Hesse, said he harbours concerns about the majority of the enlarged group’s shareholder base coming from English-speaking countries. “It is the task of the German, Hesse and Frankfurter politicians to ensure that the stock market can continue to develop,” he told the German press.
Under the deal, the LSE boss Xavier Rolet would retire. The management of the two firms have said they expect to make savings of $450m (£318.4m) a year, around a fifth of existing operating costs. The Frankfurt-based Deutsche Börse would buy the LSE through a new company called UK TopCo which will pay corporation tax in the UK yet be listed in both London and Frankfurt. The two exchanges would be subsidiaries.
The LSE’s chairman, Donald Brydon, would chair the new group’s board. Mr Rolet would work as an adviser to the chair for up to a year.
The merger could yet be upset by a rival offer for the LSE from America’s Intercontinental Exchange. Chicago’s CME is also examining a bid.
A merger between the London Stock Exchange and Deutsche Börse would create the world’s biggest exchange operator by revenue and the second largest by market value.
