The fate of the London Stock Exchange seems to be the only issue to elicit a bit of corporate nationalism in the UK. Britain has been happy to surrender its carmakers and telephone companies to foreign ownership, but there is something about the LSE that unleashes unexpected protectionism in the British (or should that be English?) soul.
Hackles rose when first Deutsche Börse, Euronext and even Macquarie – an upstart Australian bank – put in bids for London’s venerable institution.
Even participants who are usually rampant free-marketeers expressed concern that the centre of London’s liquidity would be owned by a foreign competitor – and a smaller one, in terms of the stock exchange business, at that. Buoyant half-year figures – with operating profits up 24% and a doubled interim dividend – underline that the LSE should go it alone, they say.
Well, they should be careful what they wish for, because they may get it. Just as the UK Competition Commission finally gave the go-ahead last month to both continental suitors, there is growing momentum among shareholders against a bid for the LSE and for a friendly merger of equals between Deutsche Börse and Euronext.
There is, of course, the Macquarie bid, but most pundits are not taking that entirely seriously. This does not disparage Macquarie, but merely recognises that, as a financial-only bid, the acquisition would not achieve the cost savings and synergies that could be generated by another exchange, and it is therefore unlikely to win shareholder approval in any event.
What should be taken seriously is the challenge that would be presented to the LSE by a merged continental competitor. As standalone stock exchanges, neither of them can really compete with London when measured by the number and market capitalisation of companies listed – the LSE is more than twice the size of Euronext and more than three times as big as Deutsche Börse.
But as a single entity they would be an entirely more credible competitor. Together they would form a eurozone champion with the size and strength to compete effectively against the LSE for listings and liquidity.
Insiders say that LSE management have been dressing the LSE for a sale, but were determined to accept overtures from only the best (for which read ‘wealthiest’, some argue) suitor. There’s a chance that they may have spent so long getting ready, that they have missed the ball.
