LSE, Deutsche Boerse agree merger terms

The London Stock Exchange and Deutsche Boerse said they have agreed to merge.

The two companies said total recurring cost synergies of €450m a year are equivalent to approximately 20% of the combined group's 2015 adjusted operating costs of approximately €2.2bn.

These synergies would be on top of LSEG and DBAG and are expected to be realised through technology enabled efficiencies, removing duplication in the corporate centre and business segment optimisation.

The merger is conditional on receiving competition clearance from the relevant authorities in the EU, US and Russia. It is expected to be completed by the end of 2016 or during Q1 2017.

The two companies said they had also set up a board-level committee to consider the ramifications of any vote for the UK to leave the EU in June's "in or out" poll. They added they were proceeding on the basis that" existing regulatory and political structures remain in place".

"The merger would be expected to optimise fully and benefit from the potential of the Capital Markets Union project. It is recognised that a decision by the UK electorate to leave the EU would put the Capital Markets Union project at risk," they said.

"The creation of this globally competitive exchange group would provide the EU's 23m small and medium-size enterprises as well as its blue-chips much greater access to the lower-cost equity and debt finance they need to scale up, powering sustainable economic growth and investment and creating the high quality jobs of tomorrow."

"LSEG and DBAG believe that the merger is well positioned to serve global customers irrespective of the outcome of the vote by the UK...although the outcome of that vote might well affect the volume or nature of the business carried out by the combined group. Accordingly, the outcome of the referendum is not a condition of the merger."

Under the terms of the merger, LSEG shareholders will be entitled to receive 0.4421 shares in a new holding company (UK TopCo) in exchange for each LSEG Share and DBAG Shareholders will be entitled to receive one UK TopCo Share in exchange for each DBAG share.

Assuming 100% acceptance of the DBAG Offer, the merger will result in LSEG shareholders owning 45.6% of UK TopCo and DBAG Shareholders owning 54.4% of UK TopCo on a fully diluted basis.