The London Stock Exchange is buying a majority stake in clearing house LCH.Clearnet for up to €463-million ($607-million U.S.) in a critical move by its boss Xavier Rolet after his failure to land a merger with Toronto's stock exchange.
The LSE said on Friday it will buy up to 60 percent of LCH.Clearnet in a deal valuing the clearing house at €813-million. It will pay €20 for each LCH.Clearnet share bought.
The London bourse differs from most of its rivals in not owning the clearing house for its main market, which has become more of a problem as trading revenues have fallen while earnings from clearing have held up.
The takeover of LCH, and its key swaps unit SwapClear, could help the London exchange take advantage of new rules intended to overhaul the $600-trillion over-the-counter (OTC) markets following the global financial crisis.
The LSE said it will pay for the deal from existing resources and bank facilities.
It said it had received undertakings from investors holding 46.9 percent of LCH.Clearnet shares to accept the offer.
The LSE entered exclusive talks to buy LCH.Clearnet in September.
It had been difficult to value LCH, a not-for-profit company, but the LSE had been expected to offer about €21 per share for a 51-per-cent stake of LCH, compared with a bid by data vendor Markit of €12 a share. Nasdaq had also been interested.
Clearing houses, which sit between trading partners, holding cash to be used to refund firms left out of pocket by a counterparty default, won support from regulators for their performance after the collapse of Lehman Brothers in 2008.