“As the parties failed to offer the remedies required to address our competition concerns, the commission has decided to prohibit the merger,” said Margrethe Vestager, the EU’s antitrust commissioner.
EU regulators have become increasingly tough on big deals, demanding weighty concessions to eliminate overlapping businesses amid concerns that a combined firm could dominate an industry and increase prices. While this is the second time that Vestager has formally blocked a merger, several transactions have been ditched over antitrust opposition.
Opposition to the Frankfurt-based exchange’s merger plans went up a gear after the U.K. voted to leave the EU last year. German concerns over moving the combined firm’s headquarters to London added to political riptides over clearing euro trades outside the euro area.
LSE signaled last month that it didn’t expect to win EU antitrust approval, saying the European Commission’s demand that it sell its MTS unit, a trading platform in Italy for government bonds, was impossible.
Failing to sell MTS was crucial because it undermined the viability of LSE’s offer to sell its French clearing unit, the EU said.
"It is the responsibility of the parties to address competition concerns either by rebutting them or by proposing adequate remedies," the EU said in the statement. “To be effective, remedies have to address all of the commission’s competition concerns and be viable long-term."
While LSE cited impossible regulatory demands, half a dozen people familiar with the discussions say that obscured other hurdles. These include a stalemate over the location of the headquarters, which was magnified by the Brexit vote. That decision exposed key parts of the business, like euro clearing, to political forces, said the people who asked not to be named because the talks are private.
Wednesday’s formal veto means LSE probably won’t follow through on the sale of its French clearinghouse, which it had offered to sell to win over regulators, people familiar with the matter said this week. Euronext NV still wants to acquire the unit.
The EU block on a U.K.-German exchange transaction comes a year after Vestager stopped the merger plans of two U.K. mobile phone operators.
Deutsche Boerse’s last attempt to merge with another exchange, NYSE Euronext, fell by the wayside after regulators said it would have created a quasi-monopoly for European financial derivatives traded globally on exchanges.
/The Bloomberg/
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