The London Stock Exchange has triumphed in its attempt to take over LCH.Clearnet, the London-based clearing house, after the clearer’s board favored the U.K. bourse over Markit, the rival bidder and another person familiar with the matter said on Tuesday.
The deal, which must still be approved by LCH’s 98 shareholders, marks a coup for Xavier Rolet, the French chief executive of the LSE who took over from Dame Clara Furse in 2009.
It comes after he failed this summer to clinch a merger with TMX Group, operator of Canada’s exchanges.
The LSE and LCH.Clearnet declined to comment.
LCH.Clearnet’s 21-member board, which met on Monday, approved the LSE’s offer of up to €21 a share for 51 per cent of the clearer, which is one of the most prized assets in the clearing business.
The offer values it at about €1 billion (870 million pounds, $1.35 billion), compared with Markit’s offer of €15 a share for the whole company.
Securing LCH.Clearnet would give the LSE its own clearing house in the UK at a time when London’s flagship market infrastructures—LCH.Clearnet, the LSE and the London Metal Exchange—are in a state of flux.
They face the twin threats of a planned merger of Deutsche Börse and NYSE Euronext and a wave of regulation from Brussels that is set to reshape radically the equities and derivatives trading and clearing business in the wake of the 2008 financial crisis.
The Börse-NYSE Euronext deal would not only create the world’s largest exchange but also a behemoth in trading of exchange-listed derivatives, by combining the Börse’s Eurex futures unit with NYSE’s Liffe futures business.
The LSE this summer launched its first foray into exchange-traded futures, but unlike the Börse it lacks an in-house clearer to process trades.
Ownership of a clearing house gives exchanges strategic advantages and is a growing trend in the sector.
“LCH’s board is going to go to their shareholders and see if they can get 75 per cent approval,” one person said.
Markit said: “We see clearing as complementary to our other services and LCH.Clearnet represented a unique opportunity to acquire an important piece of market infrastructure.
We unfortunately did not receive the LCH.Clearnet board support required to move ahead and seek shareholder support.
“We believe the markets would have benefited significantly from Markit’s ownership of LCH.Clearnet since we would have preserved and reinforced a neutral, horizontal clearing model.
LCH.Clearnet is, and will continue to be, an important business partner of ours and an important client.
We will continue to support them and their members by providing them with the products and services they require.”