The Intercontinental Exchange (ICE) said it’s exploring an offer for the London Stock Exchange Group, attempting to scuttle the UK company’s merger talks with Deutsche Boerse, which would create a dominant European stock exchange operator.
ICE, the owner of the New York Stock Exchange, confirmed it’s considering a bid after Bloomberg News reported the deliberations on Monday. The Atlanta-based company hasn’t approached LSE’s board about a deal, it said in a statement. The news propelled LSE’s shares up as much as 8.8% in London trading, the highest level since 2001, according to data compiled by Bloomberg.
“There can be no certainty that any offer will be made, nor as to the terms on which any offer will be made,” ICE said yesterday.
While the US firm is aware it may face political and corporate pushback if it tries to break up the European marriage, ICE has concluded that LSE shareholders can be persuaded by a higher offer, people familiar with the deliberations said.
At the least, a counterbid could force Deutsche Boerse to increase its offer, one of the people said.
“LSE is clearly a highly sought after strategic asset,” said Niki Beattie, head of Market Structure Partners, which advises brokers and exchanges. “Deutsche Boerse has probably been doing the courting for longer than ICE, so I think they’re coming from behind.”
CME Group is also working with advisers to assess whether it could challenge the deal, separate people familiar with the matter said. While a bid for LSE is the most likely option, discussions are at an early stage and the Chicago-based exchange firm may choose not to proceed, they said.
ICE is unlikely to make a move before the March 22 UK takeover deadline for Deutsche Boerse to make a formal offer for LSE, one of the people said.
ICE is working with advisers, including Morgan Stanley, to prepare an offer for LSE that may outpace its German rival’s offer, according to people familiar with the matter, who asked not to be identified because the talks are private.
Representatives Morgan Stanley and CME declined to comment.
LSE’s board confirmed that it hasn’t received a proposal from ICE and said there’s no certainty that an offer will be presented, according to a statement yesterday. The exchange company said talks between LSE and Deutsche Boerse are continuing. A spokesman for Deutsche Boerse also confirmed talks are ongoing.
The exchange business is rife with acquisitions. ICE, led by Chief Executive Officer Jeff Sprecher, became a global powerhouse in part through dealmaking, such as the 2013 purchase of NYSE Euronext. In October, Sprecher expanded its data- services business with the $5.2bn acquisition of Interactive Data Holdings Corp.
ICE has made unsolicited offers for competitors before. In 2007, the Chicago Mercantile Exchange prevailed in its quest to buy the Chicago Board of Trade over an unsolicited $11.8bn offer from ICE.
Kelly Loeffler, an ICE executive and Sprecher’s wife, paid a bellboy at the Boca Raton Resort & Club to slip the company’s proposal under CBOT executives’ doors at 6:45 am that morning, a person with direct knowledge of the matter said in 2012. The ICE counteroffer forced the Chicago Merc to improve its bid three times.
Deutsche Boerse and LSE last week announced plans to combine and create a global player worth at least £20bn ($28bn), which could better compete with ICE as well as CME Group, the world’s largest derivatives market. A German-British merger could also give customers a European champion for primary markets in London, Frankfurt and Milan, as well as access to a pan-European stock venue called Turquoise.
The transaction would gather the Euro Stoxx 50 Index, the most valuable equity benchmark in Europe, and FTSE Russell’s portfolio of indexes under the same roof. This is the third time that the German exchange group has sought to buy LSE since the turn of the century. Previous attempts failed in 2000 and 2005.