Some shareholders of London Stock Exchange Group Plc (LSE) are telling management they’re getting shortchanged by Deutsche Boerse AG’s all-share acquisition agreement, as a rival bidder contemplates a counter offer, according to people familiar with the discussions.
Some major LSE investors have balked at terms of the deal and are questioning whether it could be derailed by antitrust concerns, according to people familiar with the discussions who asked not to be named because the talks are private. Exchange executives have described the deal as a merger of equals, with no premium for either party. Intercontinental Exchange Inc. is considering making a higher offer which could include cash.
Shares of LSE are trading at about 14 percent above the value of Deutsche Boerse’s offer, reflecting speculation that the final price will be higher. The offer is worth about 25.40 pounds a share, valuing the LSE at 8.9 billion pounds ($12.9 billion), according to data compiled by Bloomberg. LSE’s current market value is 10.1 billion pounds.
The deliberations with Deutsche Boerse and LSE shareholders don’t necessarily signal a revolt to the offer already on the table, and some appeared to agree with the logic behind the combination, according to one of the people with knowledge of the talks. Should the deal go through, it would create the biggest exchange company in terms of revenue, and the market operators have touted that it could eventually remove 450 million euros ($507 billion) of annual costs from the combined company.
A spokeswoman for LSE declined to comment.
“The business sets between the companies are complementary,” Deutsche Boerse Chief Executive Officer Carsten Kengeter said Wednesday in a Bloomberg Television interview after the agreement was announced. “The combination between the two houses is extremely productive into the future, and we both know that we must gain scale in order to become globally competitive.”
Kengeter would become CEO of the combined company, while LSE boss Xavier Rolet would step down. The board would be equally split between directors from LSE and Deutsche Boerse. Scott Moeller, a professor of corporate finance at London’s Cass Business School and a former investment banker, described the deal as very close to a “textbook merger of equals.”
ICE, meanwhile, has started to line up financing, people familiar with the matter said last week. CEO Jeff Sprecher is said to be evaluating whether LSE fits strategically, and is also weighing the impact of a bid on its shareholders and its debt levels, the people said.