Pressure mounts for inquiry into competing LSE bids

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The Independent Online

Pressure is growing for a full-scale competition investigation into the competing bids for the London Stock Exchange.

Pressure is growing for a full-scale competition investigation into the competing bids for the London Stock Exchange.

While neither Deutsche Börse nor Euronext has notified the UK's Office of Fair Trading of their interest in acquiring the LSE, other interested parties have talked to the competition watchdog.

UK competition authorities have the jurisdiction to vet the bids because they are not large enough to go automatically to Brussels. But the OFT can refer a case to the European Commission if it judges that it is more appropriate for Brussels to scrutinise it. Views are divided as to which is the more appropriate body to investigate the LSE takeover battle. One industry insider said Brussels was "hot as hell on this".

Don Cruickshank, who chaired the LSE from 2000 to 2003, said: "The Office of Fair Trading would be negligent if it were not to refer this case to Brussels. This is a seminal moment in the creation of the right structure for Europe's equity capital markets, an ambition high on the agenda of everyone who wants better economic performance from the European Union."

He also said Deutsche Börse should have to dismantle its clearing and settlement structure, "sending a clear signal to closed markets in Europe". The German exchange faces increasing attacks on its ownership of equity trading, clearing and settlement businesses, which critics say gives it a monopoly, allowing it to raise fees.

Any competition investigation is expected to take months. Meanwhile, some Börse shareholders have demanded that a vote be held on a bid - but under German law the deal does not require shareholder approval. Börse yesterday also claimed that UK Takeover Panel rules prevented it from meeting shareholders at the moment.

However, the Takeover Panel denied this. Tony Pullinger, its deputy director general, said: "All the principal parties are free to speak to their shareholders, provided they don't reveal at such meetings confidential or material new information."

German legal experts say an extraordinary meeting, requested by one of Börse's shareholders - the TCI hedge fund - could not be called before May and a general meeting is scheduled for 25 May anyway. Börse wants to push on with its bid and has set up a special committee of its non-executive directors.

Its rival Euronext, which will have to put a bid to its shareholders for approval, is understood to have been approached by investors who are concerned it may overpay for the LSE and regard a bid as "fairly destructive".

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