LSE Shareholders Overwhelmingly Back Tie-up with Deutsche Boerse
London Stock Exchange Group shareholders overwhelmingly support a merger with Deutsche Boerse as German voices against the deal get louder.
LSE shareholders gave the thumbs up to the tie-up today by a vote of 99.89% for and only 0.11% against. That's far more decisive than last week's Brexit referendum with 58% of Britons voting for the U.K. to leave the 28-country European Union and 42% wanting to remain.
After Monday's shareholder meeting, the companies reiterated that they stand by their merger despite the U.K. referendum outcome.
"Whether the U.K. is just European or a member of the EU, the merger will create a globally competitive, industry-defining market infrastructure group at the service of European industry," said a statement put out by LSE.
"It is clear that the agreed merger ... will deliver value to both shareholders and customers independently of the resolution of these uncertainties," they added.
But they also noted that a referendum committee set up before the U.K. vote "may take many months to complete" amid expectations that the U.K. will stay a member of the EU for at least two years.
Deutsche Boerse shareholders have until July 12 to tender their shares, and the companies have given themselves until the end of June 2017 to complete the deal by way of scheme of arrangement.
The exchanges announced an all-stock deal in mid-March to form a new powerhouse with dual headquarters in London and Frankfurt, led by Deutsche Boerse CEO Carsten Kengeter. Deutsche Boerse shareholders are to get 54.4% of the combined entity and LSE shareholders 45.6%.
The companies had previously said the merger was not conditional on the U.K. referendum, including in shareholder documents published on June 1.
However, German political opposition to the deal has mounted since the Brexit referendum shocker, throwing the whole plan into question.
Last week, German financial markets regulator BaFin said the plan would not work if the U.K. leaves the EU, and that it was hard to imagine the most important exchange in the eurozone run from outside the EU.
While BaFin has no power to veto the deal, Deutsche Boerse will have to respond to its concerns along those of the German state of Hesse, where Deutsche Boerse operates the Frankfurt Stock Exchange in the capital city.
In addition, several top German politicians are calling for the combined company to be based in Frankfurt, with one -- Thorsten Schaefer-Guembel of the opposition Social Democratic Party - going so far as to declare the deal dead.
That sentiment was shared by an anonymous asset manager who told German news magazine Der Spiegel: "The deal is dead. Kengeter put all his chips into one basket and lost."
Even if they do successfully navigate the political opposition to the deal, the exchanges can expect close scrutiny from regulators in several jurisdictions, including the European Commission in Brussels.