London Exchange Cancels Merger Plans With Deutsche Boerse

The London Stock Exchange, facing a hostile $1.2-billion takeover from OM Gruppen, canceled plans to merge with Deutsche Boerse because it couldn’t garner enough shareholder support.

The planned merger to create iX, which would have been Europe’s largest stock exchange, has been criticized by LSE shareholders because it created potential regulatory problems and aimed to split equity trading by putting blue-chip stocks in London and technology stocks in Frankfurt, Germany.

“The proposal raised more questions than it gave answers,” said Tim Rees, director of British equities at Clerical Medical Investment Group Ltd. “Our needs as fund managers were not addressed.”

The merger cancellation may prompt other exchanges to make their own offers for the 227-year-old LSE. The Frankfurt exchange has said it may consider joining with Madrid and Milan to try to buy the London exchange. Euronext, a planned union of the bourses in Paris, Brussels and Amsterdam, has also said it’s prepared to discuss merging with the LSE.

“When the OM offer has been seen off, the board, in full consultation with shareholders and customers, will review the means by which London’s preeminent role in European equities trading can best be promoted,” said Don Cruickshank, chairman of the LSE.

Investors have pushed exchanges to merge to reduce trading costs and increase access to equities abroad. Nasdaq, which had planned to link up with London and Frankfurt, said it plans to be in Europe with or without iX.

Stockholm-based OM Gruppen, which provides the technology for markets from Australia to Canada, made its cash and stock bid for the LSE last month. OM, which also owns the Stockholm stock exchange, plans to meet with LSE shareholders, which are member banks and brokerages, this week.