Deutsche Börse races to seal London Stock Exchange deal before US rivals bid

The sides have until the week before Easter, according to the City takeover code, to complete an agreed deal to create the “super exchange”, after news of the talks was leaked a fortnight ago, reports The Times.

Analysts have been trying to assess the savings that would be available if the merger went ahead, put by insiders at more than £500 million resulting from merging IT systems and cutting other shared overheads.

By putting together trades now carried out on separate exchanges, the capital that the exchanges and their customers have to hold in case of default could also be cut. Reports have put this saving at up to $7 billion, but it is not clear how the figure was determined.

Xavier Rolet, chief executive of the LSE, hosted a lunch on Monday at the exchange’s Paternoster Square headquarters for leading investors, where it is believed that savings and other synergies were discussed. Sources said there was no guarantee that the deal could be completed by the end of next week. “There’s an awful lot to do,” one said. “You are creating a new company.”

Under the terms, the German exchange would have 54 per cent of the combined group. There would be dual headquarters in London and Frankfurt and the sides would be equally represented on the combined board.

Both sides are keen to do a deal quickly to prevent a third party from launching its own bid for the LSE. Intercontinental Exchange, which owns the New York Stock Exchange, has expressed an interest. It has until the end of the month to make its own offer. Shares in the London Stock Exchange, which have risen by more than 20 per cent since news broke of the talks with the Germans, eased up 4p to £28.32.

CME Group, operator of the Chicago Mercantile Exchange, is also thought to be considering a bid for the LSE, but has made no formal comment.

Sources close to the London market were talking down reports that as part of the Börse merger the LSE’s SwapClear operation, a global clearing house for interest rate swaps, would be relocated to Frankfurt.

LSE investors, many of whom also hold Börse shares, will have to weigh up the merger and will want more details of the savings it would bring. They also will have to assess the chances of the Americans coming in with an offer.