Germany emerges as main concern for London Stock Exchange and Deutsche Boerse as UK government appears unopposed to merger
German opposition to the London Stock Exchange’s tie-up with Deutsche Boerse is fast emerging as the main area of concern for the companies, given the UK government and European Commission are seemingly on board.
Deutsche Boerse’s chief executive, Carsten Kengeter, is to host local German politicians at an exclusive venue in the state of Hesse on Wednesday night as the exchange seeks to win support for the deal.
MPs in Hesse, whose authorities must approve the deal, are adamant that the merger cannot go through unless the legal headquarters of the combined entity are moved from London, as the deal agreement states, to Frankfurt.
Read more: UK politicians to have say on London Stock Exchange-Deutsche Boerse deal
A spokesman for the ruling Christian Democratic Union (CDU) party in Hesse told CityAM: “From our point-of-view, it is imperative that the [legal headquarters] are based in Germany.”
Asked whether Hesse would approve the deal with a London HQ, Ulrich Caspar, an MP in Hesse and member of the CDU party, told CityAM: “I think it will not be possible.”
Both exchanges are understood to be confident of winning European Commission approval for the deal. But sources close to the deal have told CityAM there is a growing recognition that the companies may need to offer something new and significant to the state of Hesse to win approval.
The UK government, as well as the opposition Labour party, on Tuesday appeared to indicate it was not opposed to the deal and played down concerns that the legal HQ could be moved away from London.
Questioned on the deal at a parliamentary debate, Simon Kirby MP, economic secretary to the Treasury, said:
The government takes a close interest in the developments of this proposed merger and the assessments of the various regulatory bodies involved.
On the suggestion the HQ could be moved to Frankfurt, he noted that this could happen in the future with board and shareholder support. But he pointed out that this would require 75 per cent of the company’s combined shareholders. He added: “I think that is a significant point.”
Kirby was speaking at a parliamentary debate secured by Tory MP Sir Bill Cash, who said it was a “slam dunk that the merger is not in the national interest”.
Labour’s Jonathan Reynolds, shadow economic secretary, also passed up the opportunity to speak out against the deal, instead saying the relevant authorities should perform a “full and in-depth assessment” of the deal.
He added:
I do worry a bit listening to Conservative members about the degree of protectionism which seems to be slipping in to centre-right parties around the world at the moment.
Read more: Under-fire Deutsche Boerse boss set for grilling at full-year conference
Cash’s view was backed by several other MPs, including fellow Tory Anne Marie Morris, who has written to the Prime Minister asking her to block the deal, or at least postpone it until after Brexit negotiations.
Others were more supportive of the deal. Kirsty Blackman of the SNP said: “It seems to me that this is not a political issue and it’s being made to feel like one.”
She added: “This is not an anti-Britain move… This was not a deal that was set up in order to try and move these things to Frankfurt.”
She also pointed out that the board will be made up of a 50-50 split between the London Stock Exchange and Deutsche Boerse and that the legal headquarters will be in the UK.
She added: “I don’t think anybody seriously thinks that Frankfurt is going to become the centre for European banking, because it’s just not the case.”
Tory MP Stephen Hammond placed the deal in the context of global consolidation of stock exchanges across the world. “There are clearly some concerns,” he said, but added that there are “significant advantages” also.
“This would create a European market infrastructure… to challenge others in the world,” he said.