The London Stock Exchange Group said on Monday that it had revised the terms of its takeover proposal for LCH.Clearnet, citing the changing regulatory environment.
The London Stock Exchange provisionally agreed to pay 15 euros, or $20, a share for 60% of LCH.Clearnet, independent clearinghouse for financial transactions. In March, the London bourse offered 19 euros a share, plus 1 euro per share as a special dividend to be paid in five years.
The companies said the changes followed discussions over coming regulation that could for the LCH to raise more capital and crimp profits. European regulators have been proposing stricter rules for clearinghouses to safeguard their operations, forcing them to increase their reserves.
Like rivals, the London Stock Exchange has looked to deals in the face of increasing competition and weakness in its core equity business. With LCH, the London exchange may benefit from regulatory changes, capturing the increasing volume of over-the-counter derivatives that will move to clearinghouses. The stock exchange currently outsources clearing activities to LCH.
Such businesses have been especially attractive in the current conditions. Last week, the IntercontinentalExchange agreed to pay $8.2 billion for NYSE Euronext to create a trans-Atlantic trading giant with a major focus on derivatives.
Under the revised plan, the London Stock Exchange would pay 14 euros per LCH.Clearnet share on completion of the transaction and 1 euro per share in 2017, which would replace the special dividend, the two companies said. Both payments would be in cash. The firms also agreed on extending their takeover negotiations until January 31 to finalize the details of the offer.