London Stock Exchange Group (LDNXF) said Friday that it will continue to work on its proposed merger with Deutsche Boerse (DBOEY) as it posted solid full-year earnings and boosted its annual dividend.The exchange operator said adjusted operating profit rose 17% to £685.8 million as revenues increased by 14% to £1.515 billion from 2015. Operating expenses, the company said, rose 4% from the previous year to £791.6 million but "continue to be well controlled." The Board will proposed a 43.2 pence per share dividend, the company said, an increase of 20% over the previous year.
"The Group continues to work hard on its proposed merger with Deutsche Borse AG -- awaiting outcome of the European Commission Phase II process on or before 3 April 2017," the company said.
That view is a modest contrast to the group's statement earlier this week, when it revealed it was unlikely to meet a demand from the EU to sell 60% of its MTS government bond trading platform in order to comply with concerns that the €29 billion ($30.1 billion) merger with the Deutsche Boerse could hamper competition in the region's financial services sector.
"Taking all relevant factors into account, and acting in the best interests of shareholders, the LSEG Board (Sunday) concluded that it could not commit to the divestment of MTS. LSEG will therefore not be submitting a remedy proposal with respect to MTS," the statement continued. "Based on the Commission's current position, LSEG believes that the Commission is unlikely to provide clearance for the Merger."
LSE shares fell around 1% at the open of trading in London to change hands at 3,111 pence each in London, extending its decline since the Sunday statement on the merger to 1.5%.
An end to the merger would mark the third time the Deutsche Boerse had failed to either buy or combine with the LSE, following unsuccessful attempts in 2000 and 2005. It would also be the sixth time a takeover or a merger with the LSE was undone, either by regulators or shareholders, in the past 16 years.
The German stock exchange operator responded late Sunday with a brief statement that noted the LSE's decision but added that "The parties will await the further assessment by the European Commission and currently expect a decision by the European Commission on the merger" by the end of March.
Last March, the two exchange operators announced the all-stock deal that would be headquartered in London and led by Deutsche Boerse CEO Carsten Kengeter, with shareholders receiving 54% of the combined entity against 45.6% for LSE owners.
"The Group continues to execute against its strategic objectives, driving both short and longer term growth through organic investment and selective inorganic opportunities," said CEO Xavier Rolet. "This has resulted in another year of strong financial performance, with continued revenue growth, control of underlying expenses and a 21% increase in adjusted earnings per share."
"Each of our business areas delivered year-on-year growth, highlighting the strength in the diversity of our business, launching new products such as LCH Spider, new services in partnership with customers such as CurveGlobal and Turquoise Plato, and expanding our global footprint with acquisitions such as Mergent Inc." Rolet added.