As if the world of stock exchanges wasn't already a network of "good old boys," it appears that another enormous acquisition may be in the works. This time, the Intercontinental Exchange (ICE) is looking to purchase the London Stock Exchange (LSE). ICE owns, among many other platforms, the massive New York Stock Exchange (NYSE).
The news that ICE may throw its hat into the ring helped boost LSE shares by 8.8% to their highest level since 2001. ICE, which is based in Atlanta, has not submitted any formal proposal as of yet, however.
Major Stock Exchange Shake-up
Deutsche Börse has been courting the London Stock Exchange for much longer than the ICE, so it may have the inside track on creating Europe's dominant stock exchange. The German exchange has already made failed attempts to merge with the LSE in 2000 and 2005.
“LSE is clearly a highly sought after strategic asset,” Niki Beattie, head of Market Structure Partners, a firm that provides professional advice to brokers and exchanges, told Bloomberg.
Discussions between Deutsche Börse and LSE are ongoing. The two sides have set a deadline of March 22nd for negotiations.
Mergers & Acquisitions
Another interesting factor in this M&A battle of titans is the primary rival to the ICE in North America, the Chicago Mercantile Exchange (CME) Group. In response to the prospect of ICE acquiring a key competitor in Europe, the CME could also place an offer for the LSE. If nothing else, this could drive up the price that ICE must pay. (Similarly, some believe this is exactly what ICE is doing to Deutsche Börse, regardless of whether or not the merger goes through.) CME Group operates the world's largest derivatives market.
The various stock exchanges have been in a prolonged period of multi-billion-dollar mergers and acquisitions, consolidating the industry into fewer and fewer umbrellas. In addition to the ICE's purchase of NYSE Euronext in 2013 and the CME's acquisition of the Chicago Board of Trade (CBT) in 2007, last summer saw Nikkei—the media company that runs Japan's main stock exchange, the Nikkei 225, the world's third-largest—scoop up the biggest financial news organization in the U.K., the Financial Times.
An additional consideration is the jurisdiction of regulatory authorities. Most experts believe that an LSE merger with the Frankfurt-based stock exchange is more likely to pass inspection since both are located in Europe. Things get more complicated when the merger takes place across the Atlantic as opposed to the English Channel. This adds to the likelihood that ICE is merely trying to bid up its overseas rival.
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