LSE buys majority stake in UK clearing firm

The companies said the deal will create a global leader in multi-asset, multi-venue clearing and risk management services. They note that regulatory change and customer demand are creating significant new opportunities for clearing and risk management services globally. Putting together the clearing operations of the two companies positions them to take advantage of these opportunities.

“The transaction will be transformative, delivering a strong, customer-focused clearing partnership between LSEG, LCH.Clearnet and our customers, the broker-dealer community,” said Xavier Rolet, chief executive of the LSE. “We will seek to promote greater innovation, choice and competition in the listed derivatives market through this new-style open-access clearing model, building on the successes we have already had with our existing equity and fixed income trading partnerships, Turquoise and MTS.”

“Transforming LCH.Clearnet into a best in class international [central counterparty] will be accelerated by the partnership’s enhanced capabilities. We see significant revenue opportunities opening up as a result of both customer and regulatory demand for more efficient and more sophisticated tools to manage market risk,” added Ian Axe, chief executive of LCH.Clearnet.

LCH.Clearnet says that it received various proposals indicating an interest in pursuing some form of business combination, but sees the LSE bid as the best offer.

The firms are predicting annual revenue synergies of up to €20 million by the end of year three, and up to €40 million by the end of year five. Total annualised cost savings from LCH.Clearnet’s strategy are expected to amount to €35.8 million by the end of 2012. The transaction is expected to be immediately earnings accretive for the LSE.

The deal is expected to be completed by the fourth quarter, and is subject to regulatory and other approvals, including anti-trust clearance.