London, Frankfurt exchanges explore merger with Nasdaq

London, Frankfurt exchanges explore merger with Nasdaq
REUTERS

July 17: The London Stock Exchange (LSE) and the Deutsche Boerse said on Monday that their proposed merged entity will explore the possibility of a full merger with the US-based Nasdaq.

The proposal, set out in a document detailing the planned combination of the London and Frankfurt exchanges, would be aimed at creating a global exchange. The London and Frankfurt exchanges said work is progressing on a joint-venture agreement as an intermediate step toward a full Nasdaq link.

"The parties also intend to take substantial cross-shareholdings in each other, and will work together thereafter to explore a full merger of interests to create a global exchange," they said.

Nasdaq officials were not immediately available for comment. In a joint statement, the exchanges said shareholders are expected to benefit from operating-cost synergies of the IX-international link totaling about œ50 million (80.2 million euros or $75.1 million) a year beginning January 1, 2002.

The board of IX-international exchanges will initially comprise a chairman, deputy chairman, chief executive, two executive directors and five additional non-executive directors. The London Stock Exchange and Deutsche Boerse have each initially nominated five directors to the board. In addition, the merger partners have agreed that two further non-executive directors, independent of both the LSE and Deutsche Boerse, will be appointed in due course.

The board will consist of: chairman Don Cruickshank; non-executive deputy chairman Rolf E Breuer; chief executive Werner Seifert; deputy to chief executive Martin Wheatley; and finance director Jonathan Howell. The non-executive directors will be Uwe E Flach, Michael Marks, Friedrich von Metzler, Ian Salter and Manfred Zass.

Extraordinary general meetings will be held September 14 in London and Frankfurt, during which shareholders will vote on the merger proposal. Last week, the supervisory board of the Deutsche Boerse voted to proceed to the next stage in the proposed merger with the LSE, but the margin of the vote and the debate's tenor suggested increased doubts about the deal.

The board voted 14 in favour of passing on to its shareholders the information memorandum offering full details on the merger. But four members of the board voted against sending the memo along, while three abstained, according to one of the board members present at the meeting. Until recently, most attention has focused on London rather than Frankfurt, because shareholders of the London exchange have been considered most skeptical about the merger's benefits.

The margin of Deutsche Boerse's vote contrasted with a far more positive vote by the same body on May 23 on whether to approve the merger plan. The May 23 vote was 17 in favour and four abstaining, but there were no negative votes. The merger must be approved by a 75 per cent vote of shareholders of both exchanges, with the votes expected in September.