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Debacle of the relationship between LSE and Deutsche Boerse leaves all losers

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UK and German exchanges have worked more than a year to alleviate regulatory concerns about their merger, which is supported by their respective shareholders. The LSE has now effectively pulled the plug, blaming the EC's "disproportionate" demand for a sale of its controlling stake in Italian bond-trading unit MTS Spa. Such a move, the LSE implies, would have irked the Italians so may not really be possible. Therefore, the British company isn't going to play ball.

Brussels still needs to officially block the merger, but it is difficult to see a way out of this situation. But the LSE's arguments are strange. One obvious candidate for MTS is Euronext NV, which already runs another transaction to eliminate the LSE. Maybe Italy would block such a deal. But surely alternative buyer of MTS might be found.

The structure of the current deal with holding company based in the UK, certainly fits the Bank of England, but it would be difficult for Hesse to swallow, especially with the upcoming Brexit.

European markets are now a large fragmented mess, especially compared with the US. The head of LSE would leave after the merger, which would allow Carsten Kengeter by Deutsche Boerse, to move the show. It will be difficult for Rolet, to convince shareholders that is one that will protect the new solo strategy. He needs to complete this transaction as soon as possible.


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