LCH.Clearnet: Merger Talks With DTCC "Going Well"
February 11 2009 - 9:52AM
Dow Jones News
London-based European settlement and clearing house LCH.Clearnet
Group Ltd. is still working on a proposed merger with New
York-based Depository Trust & Clearing Corp., and it expects to
finalize a deal around the end of March.
"When we first announced the proposed merger, we were looking at
a deal around mid-March. That was quite an aggressive timetable
when you think of the amount of due diligence which needed to be
done," LCH.Clearnet spokeswoman Andrea Schlaepfer said
Wednesday.
"It might slip by a couple of weeks, but that is not
unreasonable. The due diligence is progressing and it's going well
at the moment," Schlaepfer said.
The comments are largely in line with what DTCC spokesman Stuart
Goldstein said two weeks ago - that the company aims to finalize a
deal with LCH.Clearnet by the end of March.
The comments also come amid expectations of a counterbid for
LCH.Clearnet by a consortium of financial institutions that
includes U.K.-based inter-dealer broker ICAP PLC (IAP.LN).
That consortium could include BNP Paribas SA (13110.FR),
Citigroup Inc (C), Deutsche Bank AG (DB), HSBC Holdings PLC
(HSBA.LN), JP Morgan (JPM), Royal Bank of Scotland Group PLC
(RBS.LN), Societe Generale (13080.FR) and UBS AG (UBS). Most of
them are European banks.
ICAP said Feb. 2 that it may launch a counterbid as part of a
consortium. So far, no formal offer has been made, Schlaepfer
said.
There are expectations that ICAP could update the market on its
interest in LCH.Clearnet when ICAP releases its interim management
statement Thursday.
The Observer newspaper reported that a bid by the consortium
could be worth GBP800 million, which works out to around EUR12 a
share, higher than the EUR10-a-share bid by DTCC.
LCH.Clearnet didn't comment specifically on whether it would be
open to other talks if a higher offer is put up. "We can't comment
on anything which the consortium might or might not do," Schlaepfer
said.
Some newspapers recently said a merger between DTCC and
LCH.Clearnet would create a monopoly and hit competition in the
sector. The two firms in October said the planned merger "aims to
create the world's leading clearing house."
On the flipside, some observers say any effort by the consortium
to block the DTCC-LCH.Clearnet merger would reflect a growing sense
of "provincialism," with European banks and dealers creating
defensive positions to clear more over-the-counter trades.
Jeffrey Sprecher, CEO of Atlanta-based IntercontinentalExchange
Inc. (ICE) said last week that the transatlantic battle over
LCH.Clearnet "plays into the whole sense of nationalization right
now."
Sprecher, whose exchange in November transferred its clearing
business from LCH.Clearnet to ICE's own European clearing house,
said a big part of the debate over LCH.Clearnet's fate is whether
it should have ties to the U.S. or remain under European
control.
DTCC handles the bulk of clearing services for equities and
municipal bonds in the U.S., as well as processing over-the-counter
derivatives trades. LCH.Clearnet's client base includes London
Stock Exchange PLC (LSE.LN) and units of NYSE Euronext (NYX).
(Jacob Bunge in New York contributed to this report.)
Company Web site: www.lchclearnet.com
-By Vladimir Guevarra, Dow Jones Newswires, Tel. +44 (0)
2078429486, vladimir.guevarra@dowjones.com