London Stock Exchange and Deutsche Borse agree to create giant exchange worth €26bn
The London Stock Exchange and German rival Deutsche Borse revealed plans to save more than €448m a year as they agreed a tie-up to create an exchange giant worth more than €26bn.
Billed as a "merger of equals", the deal will see Deutsche Borse own 54.4% of the combined group and LSE shareholders the remaining 45.6%.
The pair pressed on with their all-share deal amid the threat of a possible rival bid from the owner of the New York Stock Exchange.
Intercontinental Exchange confirmed it was mulling a possible counter-offer earlier this month for the LSE, which owns index compiler FTSE and Borsa Italiana.
Chicago's CME Group has also reportedly considered entering the fray.
The LSE and Deutsche Borse deal marks their third attempt to merge after previous moves failed in 2000, and 2004-5 when talks collapsed.
Under the merger plans, the combined LSE and Deutsche Borse will maintain headquarters in London and Frankfurt, while it will also be listed on the LSE and Frankfurt Stock Exchange.
The as-yet-unnamed group will be domiciled in the UK for tax purposes.
Details of the deal revealed aims to save €450m a year following the merger.
They said it was too early to gauge the impact on jobs, but said there will be "operational and administrative restructuring" and the potential for savings where there is duplication.
The groups said the deal will "bring together" the might of London as one of the world's biggest financial centres and Frankfurt, the home of the European Central Bank with access to Europe's largest economy.
Xavier Rolet, chief executive of London Stock Exchange Group, said: "We are creating an industry-defining combination."
Carsten Kengeter, chief executive of Deutsche Borse, added: "It is the logical evolution for our companies in a fundamentally changing industry.
"As a combined group we will create a European player that will compete on a global basis."
The agreed all-share deal will see Mr Rolet step down, with Deutsche Borse boss Mr Kengeter becoming chief executive of the combined company and LSE's Donald Brydon taking up the role of chairman.
On stepping down, Mr Rolet will be retained as an adviser to the chairman and deputy chairman for up to a year to help with a smooth handover.
The bourses reiterated warnings over the impact of a Brexit vote and said they have set up a referendum committee.
They said a Brexit could "affect the volume or nature of the business carried out by the combined group", but added that the merger is "well positioned to serve global customers irrespective of the outcome of the vote".
It is hoped the deal will complete by the end of this year or first quarter of 2017.
But it has to first clear potential regulatory hurdles - a significant threat given that the EU blocked a proposed merger of Deutsche Borse and NYSE Euronext in 2012.
Peter Gray, partner at Cavendish Corporate Finance, said: "Opportunities are rife for cost savings, but the major test lies in the regulatory hurdle which, combined with added scrutiny in the context of Brexit, places the onus on the two companies to make a compelling case for the deal over the coming months."