Merger Document Released
London Stock Exchange
17 July 2000
Merger Information Document published
Outline of iX-international exchanges strategy and merger benefits;
International group of key market users to advise board;
Board members nominated.
London Stock Exchange and Deutsche Borse have today published the Information
Documents which provide shareholders with details of the proposed merger to
create iX-international exchanges.
The documents outline the goals and strategy of the new company, benefits of
the merger for shareholders and customers, as well as the technology to be
used. Shareholders will vote on the proposed merger on 14 September at
extraordinary general meetings of the London Stock Exchange and Deutsche
Borse.
Commenting, Don Cruickshank, chairman designate of iX-international
exchanges, said: 'The critical mass and significant synergies created by this
merger will bring lower dealing costs, better prices and unprecedented access
to a wide range of international investment opportunities and markets.
iX-international exchanges will be Europe's largest equities market and the
world's leading derivatives exchange, with the financial strength to develop
a substantial information and e-commerce business.
'We believe that iX-international exchanges will provide benefits to all
market users and the board firmly recommends this merger to our
shareholders.'
Werner Seifert, chief executive-designate of iX-international exchanges,
said: 'Bringing together the two leading stock exchanges in Europe is an
important step in enhancing the efficiency of European capital markets. Both
boards believe that it will benefit investors, issuers, intermediaries and
thus shareholders.'
Goals and strategy
London Stock Exchange and Deutsche Borse intend that iX-international
exchanges should become the leading global exchange organisation, providing
services at lowest costs and creating significant benefits for its customers
and value for its shareholders. iX-international exchanges will offer a broad
range of services, including trading and information products for equities
and derivatives, exchange systems technology and new e-commerce initiatives.
Consultation
Before making substantial changes to market structures or services,
iX-international exchanges will seek input from a broad range of market
users, including private client brokers, dealers, investors and issuers.
iX-international exchanges will establish a new Senior Market Advisory Group
to provide practitioner input to the board.
Benefits
Benefits for both customers and shareholders will result from the critical
mass that will be created by combining markets and by the economic effects of
creating a single electronic trading platform and rationalised
infrastructure.
- Private client brokers and other intermediaries will benefit from the
lower charges derived from economies of scale, as well as easier access to
a broad range of products and services. iX-international exchanges will
support initiatives to link the single electronic trading system to one
central counterparty.
- Investors will benefit from lower transaction and dealing costs as a
result of cost synergies primarily achieved in the areas of technology and
systems. Increased liquidity is expected to lead to narrower bid-offer
spreads and thus more competitive pricing.
- Companies will benefit from the concentration of investor focus and
access to a deeper pool of capital.
- Shareholders are expected to benefit from operating cost synergies of
approximately £50 million per annum from the year commencing 1 January
2002. iX-international exchanges will be managed with the objective of
maximising shareholder value.
Markets
In addition to its existing markets, iX-international exchanges will develop
a pan-European blue-chip market under the UK regulatory regime and a
pan-European high-growth market under the German regulatory regime. Companies
will be able to use their home country listing when admitted to trading on
iX-international exchanges' new markets.
Indices
Existing indices such as the FTSE 100 or DAX will continue to exist. While
they are defined by the country of their constituents, iX-international
exchanges intends to ensure the market has a single pan-European index
family, as well as derivative products based on these indices.
Nasdaq
The merger partners' ultimate aim is to form a long-term, substantive
relationship on a global basis with Nasdaq. Work is currently in hand on a
joint venture agreement to provide an intermediate step towards achieving the
shared global vision. The parties also intend to take substantial
cross-shareholdings in each other and will work together thereafter to
explore a full merger of interests to create a global exchange.
Milan and Madrid
The stock exchanges of Milan and Madrid have indicated that they will
negotiate with iX-international exchanges to become part of the group
following the merger.
Technology
Technology for iX-international exchanges will be provided by Deutsche
Borse's existing IT subsidiary Deutsche Borse Systems. iX-international
exchanges is committed to the development of an upgraded trading platform,
based on Xetra technology, which will accommodate the functionality of all
iX-international exchanges' markets on one platform. The migration of all
trading to this platform should be completed by December 2001.
To reduce the impact on customers of the migration to the unified trading
platform, iX-international exchanges will offer extensive assistance to its
customers including, for example, the provision of optional 'starter kits'.
iX-international exchanges will set aside a sum of £8 million to be used to
make a cash payment of approximately £30,000 to each existing customer of the
London Stock Exchange's trading services as a contribution to the cost of
migrating from the existing infrastructure.
Board
The Board of iX-international exchanges will initially comprise the chairman,
deputy chairman, chief executive, two executive and five additional
non-executive directors. The London Stock Exchange and Deutsche Borse have
each initially nominated five directors onto the board. In addition, the
merger partners have agreed that two further non-executive directors,
independent of both the London Stock Exchange and Deutsche Borse, will be
appointed in due course.
The board will consist of:
Don Cruickshank (chairman); Rolf-E. Breuer (non-executive deputy chairman);
Werner Seifert (chief executive); Martin Wheatley (deputy to chief
executive); Jonathan Howell (finance director). Non-executive directors: Uwe
E. Flach; Michael Marks; Friedrich von Metzler; Ian Salter; Manfred Zass.
Timetable
Over the next few weeks there will be a series of visits with shareholders
and customers of the London Stock Exchange and Deutsche Borse.
Extraordinary General Meetings will be held on 14 September in London and
Frankfurt at which shareholders will vote on the merger proposal.
For shareholders in the London Stock Exchange, an off-market matched bargain
dealing facility in the Exchange's shares will be offered by Cazenove & Co
from 24 July 2000.
Note to editors: Details of this merger, which is subject to shareholder and
regulatory approvals, are contained in the Information Documents. The above
is a summary of the documents, which can be accessed on the websites of the
two exchanges:
www.londonstockexchange.com
www.exchange.de
PRESS ENQUIRIES
Deutsche Borse +49 69 21 0115 00 London Stock Exchange 020 7797 1222
Walter Allwicher Kay Dixon
Jeremy Hughes
Goldman Sachs +49 69 7532 1000 Schroders 020 7658 6000
Stefan Jentzsch Jan Skarbek
Brunswick (for LSE) Merrill Lynch 020 7628 1000
Derek Bainbridge 020 7404 5959 Guy Dawson
Schroders, Merrill Lynch and Cazenove & Co., which are regulated in the
United Kingdom by The Securities and Futures Authority Limited, are acting
for London Stock Exchange and for no one else in connection with the Merger,
and will not be responsible to anyone other than London Stock Exchange for
providing the protections afforded to the respective customers of Schroders,
Merrill Lynch and Cazenove & Co. or for providing advice in relation to the
Merger.
Goldman, Sachs & Co. oHG is acting for Deutsche Borse in connection with the
Merger and for no one else and will not be responsible to anyone other than
Deutsche Borse for providing the protections afforded to customers of Goldman
Sachs or any of its affiliates or for providing advice in relation to the
Merger.
Schroders and Merrill Lynch have approved the contents of this announcement
for the purposes of section 57 of the Financial Services Act 1986.
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