The London Stock Exchange has triumphed in its attempt to take over LCH.Clearnet Group Ltd., the London-based clearing house, after the clearer's board favoured the U.K. bourse over Markit, a rival bidder, Markit and another person familiar with the matter said on Tuesday.
The deal, which must still be approved by LCH's 98 shareholders, marks a coup for Xavier Rolet, the French chief executive of the LSE, since he took over from Clara Furse in 2009. It comes after he failed this summer to clinch a merger with TMX Group, operator of Canada's exchanges.
The LSE declined to comment.
LCH.Clearnet's 21-member board, which met on Monday, approved the LSE's offer of up to €21 a share for 51 per cent of the clearer, which is one of the most prized assets in the clearing business. The offer values it at about €1-billion, compared with Markit's offer of €15 a share for the whole company.
Securing LCH.Clearnet would give the LSE its own clearing house in the U.K. at a time when London's flagship market infrastructures – LCH.Clearnet, the LSE and the London Metal Exchange are in a state of flux.
They face the twin threats of a planned merger of Deutsche Börse and NYSE Euronext and as a wave of regulations from Brussels are set to reshape radically the equities and derivatives trading and clearing business in the wake of the 2008 financial crisis.
The Börse-NYSE Euronext deal would create not only the world's largest exchange, but would create a behemoth in trading of exchange-listed derivatives by combining the Börse's Eurex futures unit with NYSE's Liffe futures business. The LSE this summer launched its first foray into exchange-traded futures, but, unlike the Börse, lacks an in-house clearer to process trades.
Owning a clearing house gives exchanges strategic advantages and is a growing trend in the sector.
"LCH's board is going to go to their shareholders and see if they can get 75 per cent approval," one person said.
"We see clearing as complementary to our other services and LCH.Clearnet represented a unique opportunity to acquire an important piece of market infrastructure," Markit said. "We unfortunately did not receive the LCH.Clearnet board support required to move ahead and seek shareholder support.
"We believe the markets would have benefited significantly from Markit's ownership of LCH.Clearnet since we would have preserved and reinforced a neutral, horizontal clearing model. LCH.Clearnet is, and will continue to be, an important business partner of ours and an important client. We will continue to support them and their members by providing them with the products and services they require."