Werner Seifert Of Deutsche Borse: Stock exchange boss who knows the score

Julia Kollewe
Saturday 18 December 2004 01:00

Four years after he failed to pull off a merger with the London Stock Exchange, Werner Seifert, the jazz-loving chief executive of Deutsche Börse, is back in town for another bite at the cherry. Second time lucky?

Four years after he failed to pull off a merger with the London Stock Exchange, Werner Seifert, the jazz-loving chief executive of Deutsche Börse, is back in town for another bite at the cherry. Second time lucky?

The boss of the German exchange is optimistic that a deal can be agreed this time, stressing that his interest is not a hostile bid. "We had a good meeting (last Wednesday), we have already set up the next meeting, very soon, so I think we're perfectly on track. We're focusing on getting an agreed deal with the LSE and we are confident that this will be possible."

Persistence - or an obsession with London - is one of the defining characteristics of the 55-year-old Swiss national, who has turned Europe's largest exchange into a success during his 11 years at the helm.

If the capital markets had not lured Mr Seifert, then he would probably have become a professional musician. He still plays the Hammond organ with his band, the BigBrazzPack and while preparing his swoop on the London market, Mr Seifert found time to record a CD of jazzed-up Christmas tunes, which became record of the month on Berlin Jazz Radio.

"I started at the age of four with piano, became a church organist at the age of 13 and then, much to my mother's dismay, the Beatles came in 1963 and completely ruined all her education in Mozart and Bach," says Mr Seifert as he puffs on his pipe. "I set up one of the first rock bands in Germany. At the age of 17 I was already recording and performing on TV and thought that I would be the biggest star. And at the age of 19 I decided I'm not good enough so I went on to university. You have to be very self-critical in music and I like to have it as a hobby, but with ambition."

His other passion is British sports cars: he owns a couple of Jaguars. Occasionally he ditches his Mercedes to drive to work in a classic Mini.

Since the abortive merger attempt with the LSE in 2000, the market has been waiting for Mr Seifert to make another foray and this time it seems it saw him coming from a long way off. In the six weeks leading up to the Deutsche Börse bid, the LSE's shares rallied 25 per cent. A week last Sunday, he received a phone call from his opposite number at the LSE, Clara Furse, asking what Deutsche's intentions were, whereupon he sent them a "short" letter setting out its interest and the London exchange's board met to discuss it. In line with takeover rules, both exchanges put out public statements the following day: Deutsche briefly outlined its £1.35bn bid, which the LSE rejected as too low but agreed to hold talks.

Asked whether a leak from Deutsche's supervisory board triggered the surge in LSE shares on 10 December, he lapses into Anglo-Saxon: "That's bullshit. If you want to buy something and the price goes up, you don't like it, right? There was no leak on our side."

Although Deutsche was flushed out prematurely, in many ways it was already well prepared. For the past 12 months Mr Seifert has been on a charm offensive, meeting and schmoozing with customers, institutions, policymakers and regulators in London. Three Londoners have been appointed to Deutsche's supervisory board and almost half of the non-executive directors are non-German. Apart from the Swiss Mr Seifert, an American, an Austrian and three Germans sit on the executive board.

The possibility of a counter bid by Euronext, which some observers think would be a better fit with the LSE as it already has a London presence in the shape of Liffe, leaves Mr Seifert unperturbed. "If you enter a process like this you don't rule out an auction."

Since LSE shareholders voted down the proposal to merge with Frankfurt four years ago, the German exchange has gone from strength to strength. The shares have powered ahead as Mr Seifert set about modernising the market, acquiring clearing and settlement houses to build an efficient, vertically integrated structure and exporting the Eurex derivatives platform to the United States.

Eurex was formed when Mr Seifert merged Frankfurt's derivatives exchange with its Swiss counterpart and has overtaken Liffe, its UK equivalent, handling the majority of futures trading in government bonds.

By contrast, the London exchange has been slow to embrace change and has stumbled from one crisis to the next, ranging from the botched introduction of an electronic trading system to the mishandled setting up of a computerised settlements system. It missed out on the opportunity to snap up Liffe, which was instead sold to Euronext. The decision to focus on equity trading, leaving settlement and clearing to others, may be popular with its customers who fear a vertically integrated structure gives an exchange an unfair pricing advantage. But it also means that the LSE finds itself the smallest of the three big European exchanges, with Deutsche Börse and Euronext likely to play the role of consolidators in Europe's equity markets.

Mr Seifert said he takes LSE customer concerns about Deutsche's vertical structure seriously, but reiterated that he would not mess with the London exchange's existing clearing and settlement arrangements. "We assured the London market that we will honour all existing contracts with the London Clearing House and Crest [the settlement system] and I am eager to say that we see no situation coming up where we in the future would not use Crest. We would never, never take away clearing flow from the London Clearing House without members agreeing to that step."

Mr Seifert passionately believes in the need for consolidation in Europe's exchanges. "The capital market in Europe is lagging behind the US, it's too fragmented. By combining two of the larger exchanges I think we can make a humble, small contribution to the further harmonisation of European capital, which should be beneficial for investors, issuers and intermediaries" by lowering transaction costs. He hinted that he and Ms Furse would run the combined company together if a deal emerges, and paid respect to her achievements. He said: "I think Clara has been grossly undervalued by the media in the UK. Clara created the best-working equity market in Europe, in fact she runs the equity market better than we run ours."

The two chief executives have been discussing whether to base a combined company in London, even though a deal seems a long way off. That would not go down well in Germany, where the Bundesbank has indicated its opposition, though it has no say in the matter. It seems that Mr Seifert would not mind moving to London where his girlfriend lives: Lisa Traeger, publisher of the European edition of Euromoney's Institutional Investor.

In managing the German exchange, Mr Seifert says he takes his inspiration from Duke Ellington. "I like Duke Ellington: he runs his big band in the way I would like to run this company. As a manager you have the choice to run the company like a symphony orchestra or to run it like a big band. Times are not so that we can run it like a symphony orchestra. A symphony orchestra is dependent on sheet music ... a big band you run with a minimum of structure, so you combine individualistic characters, a team with a structure, and you as a leader are not the great conductor standing up there, you are sitting at the piano you are playing with them and that's why the organisational form of a big band is much more adequate for today's challenges than a symphony orchestra."

That said, Mr Seifert rushed off to a soundcheck.

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