German group abandons LSE bid

The German group stalking the London Stock Exchange today called off its £1.4bn (€2bn) takeover campaign.

Deutsche Boerse, which first revealed its interest in December, said it planned to return a “significant” amount of cash to shareholders instead.

The move came after talks between Deutsche Boerse and its major shareholders, many of whom have publicly opposed a bid on the grounds that it adds little value to the company.

Deutsche Boerse has also been frustrated by the stance taken by LSE bosses who have turned down its takeover proposal of a minimum 530p per share on the grounds that it is too low.

However, the group said it might resurrect its bid if Paris-based rival Euronext follows up its interest with a formal offer for the LSE or another group enters the fray.

Chief executive Werner Seifert said the group still believed that shareholders, issuers, investors and intermediaries would have benefited from a successful bid for the LSE.

But he said: “At the same time, we recognise that a significant portion of our shareholder base is focused on a return of capital in the short term.”

Media reports have suggested that as many as 35% of investors in Deutsche Boerse were opposed to a takeover of the LSE. Some had threatened to force a meeting to overthrow the board if their concerns were not met.

Deutsche Boerse announced a 27% improvement in the annual dividend last month and said today that it was developing a plan with shareholders to return additional funds.

“The broad portfolio of businesses of Deutsche Boerse Group provides a wealth of opportunities to continue to create value for our shareholders and benefits for our customers and stakeholders,” Mr Seifert added.

The LSE has long been seen as a target of Deutsche Boerse, which has a market value of around $6bn (£3.1bn/€4.5bn), and the two companies were poised to merge four years ago.

At that time, the LSE was owned by its members who decided that a deal would not be in their interests.

The deal also foundered in the face of a hostile bid for the LSE from Stockholm Stock Exchange operator OM Group.

Last month, the London market watchdog warned of “significant” implications for the LSE if a future owner moved it to another country, raising concerns that it might no longer be subject to UK takeover and corporate governance laws.

The Financial Services Authority also warned it might have to share responsibility for investigating market abuse with the authorities of the new owner’s country.