Deutsche Börse’s attempt to take over the London Stock Exchange (LSE) faced fresh difficulties on Thursday when German politicians and bankers demanded a Frankfurt head office for the combined entity.
As Werner Seifert, the Deutsche Börse chief executive, held talks with his LSE counterpart, Clara Furse, it emerged that the German government has raised objections about any offer to move the head office to London.
Seifert, who has already made English the language of business at the Börse, has let it be known that the management of the combined equities and derivatives markets will be handled by London rather than Frankfurt if the takeover goes ahead.
But government circles in Berlin said that, while ministers support the idea of a merger, it is ”in the vital interests” of Germany as a financial location — and of Frankfurt in particular — that the exchange remains headquartered in the city.
As domestic pressures mounted on the German exchange, its rival suitor for the LSE, Euronext, turned up the heat by insisting that it will pay cash for the London market.
Jean-Francois Theodore, the chief executive of Paris-based Euronext, is due to meet Furse on Friday to provide details of his proposals.
While Deutsche Börse has said it will pay 530 pence a share for the LSE — valuing the market at £1,3-billion (R14,95-billion) — Euronext has yet to a put a price on its potential offer.
The Dutch-French combine is not expected to put a value on its offer on Friday and did not elaborate on Thursday on where the cash will come from.
Instead, Theodore is expected to focus on how customers will be treated and stress that the LSE will thrive under new ownership.
Euronext is also expected to offer to run large parts of its operations from London. It already runs its derivatives business from the city following the takeover of Liffe, the London futures market.
The Deutsche Börse, however, is said to be receiving direct pressure to remain in Frankfurt. It is thought to be ready to move two members of its executive board to London.
It is understood that Hans Eichel, the Finance Minister, has made the government’s concerns, including those of Chancellor Gerhard Schröder, quite clear to the exchange’s executive board, especially Seifert.
Schröder, in line with his predecessors, has made the retention and expansion of ”Finanzplatz Deutschland” a central plank of economic and industrial policy as London has grown into Europe’s leading trading centre — at Frankfurt’s expense. Bankers are also concerned.
Hans Reckers, a board member of the Bundesbank, Germany’s central bank, said Frankfurt should remain a crucial centre for any combined market.
”It is not just the headquarters of the Börse but also important market segments that must stay permanently in Frankfurt,” Reckers said.
Alois Rhiel, the minister for economic affairs in Hessen, the state where Frankfurt is located, said: ”It’s our wish that the headquarters stay here to maintain Frankfurt’s standing as the number-one financial centre in continental Europe. And we expect the headquarters to stay here because the Börse is in a stronger position in the negotiations.”
The offer to move the management of the equity and derivatives to London involves just less than half of Deutsche Börse’s business. The other part of its business is the clearing and settlement operations. — Guardian Unlimited