LSE and Deutsche Boerse to merge but warn of Brexit risks

London-Stock-Exchange-Logo-700.jpgThe London Stock Exchange and the Deutsche Boerse have laid out plans for their merger, but have warned on the risk of Brexit.

Earlier this week, the LSE said it was in merger talks with its German rival, a deal which would create one of the world’s largest exchanges.

Speaking about the deal, the two firms said a potential Brexit might jeopardise the deal.

The duo say: “The parties are proceeding on the basis that existing regulatory and political structures remain in place.

“This transaction would be expected to fully optimise and benefit from the potential of the Capital Markets Union project. It is recognised that a decision by the UK electorate to leave the European Union would put that project at risk.”

For this reason, the two boards have created a referendum committee “to consider and make non-binding recommendations to the boards on the ramifications of such a decision”.

However, they said they “believe that the potential merger would be well positioned to serve global customers irrespective of the outcome of the referendum, although this might well affect the volume or nature of the business conducted in the different financial centres served by the combined group. Accordingly, the outcome of the referendum would not be a condition of the potential merger.”

The announcement comes as the two companies reveal more details on their merger.

The group will be domiciled in London, with headquarters both in London and Frankfurt, while current DB chief Carsten Kengeter to lead the new firm.

LSE’s chief financial officer David Warren will retain the same role in the new group, while the chairman of the combined group will be Donald Brydon and Joachim Faber will be his deputy.

Wealth Management Association chief executive Liz Field, however, expressed concerned on the merger and said she’ll monitor it closely.

She says: “The key priority for WMA and its members when there are any proposed mergers or takeovers involving the London Stock Exchange is to ensure that retail clients can continue to trade equities and other listed financial assets as cost-effectively and efficiently as possible.

“We have no reason to doubt that this will be jeopardised if the LSE and Deutsche Boerse were to merge, but we will of course be monitoring any developments closely.”