KEY POINTS:
The London Stock Exchange has finally revealed its hand in the consolidation sweeping the industry by entering merger discussions with its Italian rival Borsa Italiana.
The LSE, which has rejected offers from Euronext, Deutsche Borse, OMX, Nasdaq and the Australian investment bank Macquarie, confirmed yesterday that it "is in discussions with Borsa Italiana to establish whether a merger of the two businesses can be agreed".
It is believed that the LSE is ready to sign a memorandum of understanding for an intended merger and that the Italian exchange will meet today to approve the details.
The LSE would be the senior partner in a merger with Borsa Italiana, Europe's fourth largest exchange, which is unlisted and owned by several Italian banks.
Borsa Italiana is believed to be worth about £1 billion ($2.6 billion), compared with the LSE's £2.75 billion market capitalisation.
LSE chief executive Clara Furse is understood to have discussed a possible merger with her counterpart, Massimo Capuano, twice last year. She is thought to be attracted by Borsa Italiana's strong derivatives platform, an area in which the LSE is weak, and its leading IT system.
Debate over the terms of the merger will also involve tariff levels and management control.
Capuano is believed to have been very keen on a merger with the LSE last year, but turned to Euronext and Deutsche Borse after initial talks failed. However, his contingency plan to create a "super exchange" by orchestrating a three-way merger fell apart after Euronext agreed a £6.3 billion deal with the New York Stock Exchange.
Consolidation has also seen Nasdaq, which made a failed £2.7 billion bid for the LSE, agree to buy Nordic operator OMX for US$3.7 billion ($4.84 billion). The LSE's merger could still be complicated by Nasdaq, which retains a 30pc stake in the UK exchange from the time of its failed bid last year.
- INDEPENDENT
