Deutsche Börse's frustrations over LSE bid restrictions grow

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The Independent Online

The London Stock Exchange (LSE) plans to hold more talks this week with Deutsche Börse and Euronext over their rival plans to acquire the stock market operator as the German bidder edges closer to launching a hostile takeover bid.

The London Stock Exchange (LSE) plans to hold more talks this week with Deutsche Börse and Euronext over their rival plans to acquire the stock market operator as the German bidder edges closer to launching a hostile takeover bid.

Although Deutsche Börse has faced questions over its plans for LSE from its own shareholders, the company believes its investors should trust management, led by Werner Seifert, the chief executive, to land a deal that will continue its record of growth.

Standard Life has become the latest Deutsche Börse shareholder to air concerns publicly about the LSE bid. It is demanding that Mr Seifert demonstrate clearly why a takeover of the LSE would create more value for shareholders than a share buy-back.

However, Deutsche Börse cannot brief its own shareholders about its plans because of a confidentially clause it has agreed with the LSE while talks are ongoing. It is increasingly frustrated by the fact that it is powerless to answer concerns raised in public by its own shareholders.

Under its plan Clara Furse, the LSE chief executive, would report to Mr Seifert and be responsible for running the enlarged group's equity trading operations.

Responsibility for derivatives operations will be handed to another member of management. Chris Gibson-Smith, the LSE chairman, is expected to be offered a role on the enlarged group's supervisory board or on the board of the subsidiary company that will operate the group's London operations and which will be regulated by the Financial Services Authority.

Deutsche Börse plans to cut the costs of trading shares by at least 10 per cent if it wins control of the London exchange.

It remains determined to bid, having made its first approach to the LSE in mid-December, and will resort to a hostile takeover if necessary, although it is keen to avoid that scenario. All the parties involved would prefer to present a recommended deal to the UK competition authorities who are thought to be certain to investigate any transaction involving the LSE as it would create a new, dominant force in Europe.

A precursor to a hostile bid by Deutsche Börse would be a formal notification being made to the Office of Fair Trading of its intention to bid; a move that would be designed to add extra pressure on the LSE board and management.

It has indicated that it is willing to pay at least 530p a share, valuing the LSE at £1.3bn, although the market expects any successful bidder to pay closer to 580p a share.

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