UBS points out Deutsche Boerse's long-term growth potential

Whether or not Deutsche Boerse's proposed buy-out of rival London Stock Exchange panned out in the end or not, the exchange operator's future was bright, UBS told clients on Tuesday.

The company was set to become a key beneficiary of regulatory changes in the pipeline (T2S, EMIR and MiFID II), analyst Michael Werner said in a research report sent to clients.

Recent moves by management to rearrange the business would also stand it well in the longer-term, the Swiss broker argued.

Close-ties with buy-side firms should also give it an advantage over the longer-term, given how sell-side institutions were facing significant capital and cost-control headwinds, Werner said.

As for the proposed tie-up, the analyst pointed out how "a number of exchange-related deals that have not reached completion due to counter-bids, shareholder disapproval and/or regulatory challenges."

Nonetheless, he believed that a combination would probably be positive for Deutsche Boerse, with 11% expense synergies possible which would in turn be 8-10% accretive.

He also called attention to the fact that prior to the proposed deal announcement markets were assigning 31% of LSE's value to its long-term growth potential, versus -5% for Deutsche Boerse.

Werner stood by his 'buy' recommendation on the shares of the German exchange operator and €88.30 share price target.