London Stock Exchange Group said its planned $30 billion merger with German rival Deutsche Boerse could initially cut 1,250 jobs across the combined group and should eventually lead to 250 million euros ($279 million) in extra revenue a year. LSE, which agreed in March to merge with Deutsche Boerse in an all-share deal to create the world's biggest exchanges group by income, said it expected to achieve the full revenue benefits in the fifth year after the deal is completed.
The company, which owns Borsa Italiana and the London Stock Exchange, said about 160 million euros per year would come by the third year after the deal closes. The revenue benefits would come from the combination of the groups' index and information services businesses including the FTSE Russell and STOXX indexes. They would also come from the development of trading and clearing products, LSE said. LSE reiterated its expectation for cost savings of 450 million euros annually from the third year.
The combined group, whose name is yet to be announced, currently employs 8,000 people and net job losses after new roles are created would be 700, or under 10 percent of the workforce, with no compulsory redundancies in Germany. LSE's shareholders will be asked to approve the merger on July 4, the company said. The merger will need the green light from European Union competition officials, and an application to Brussels will likely be made in late June, Deutsche Boerse CEO Carsten Kengeter told analysts.
He expected to make "continued good progress" in discussions with regulators in coming months. Sources familiar with the matter said Deutsche Boerse's home state of Hesse had asked for more information, but Kengeter sought to reassure analysts by saying there was no need to speculate at all about this.
Analysts say divestments in clearing may be needed to obtain anti-trust approval for a deal that would bring together Europe's two main clearing houses for derivatives. Harnessing the benefits of multiple clearing houses would make up a quarter of the annual 250 million euros in revenue synergies outlined on Wednesday. LSE CEO Xavier Rolet told analysts there were no plans to physically merge the two clearers, LCH.Clearnet and Eurex Clearing - a step that could have raised financial stability concerns among regulators.
Rolet also said he didn't expect to have to increase capital levels at LSE's clearing houses. The deal is not conditional on the outcome of Britain's June 23 referendum on membership of the European Union, the firms have said. LSE shares closed down 1.4 percent at 2,717 pence, while Deutsche Boerse's ended up 1 percent at 79.5 euros. LSE also said the sale of its Russell asset management business to US private equity firm TA Associates had completed.