Frankfurt bourse drops merger plan

15th November 2006, Comments 0 comments

Frankfurt (dpa) - The Frankfurt stock exchange dropped plans Wednesday to merge with the pan-European bourse Euronext NV as a group of the world's leading investment banks announced moves to forge a new rival European share trading platform. The German stock exchange operator Deutsche Boerse AG said it was pulling out of its long-running battle to buy Paris-based Euronext paving the way for the formation a new transatlantic share market. However, Deutsche Boerse's statement coincided with an announcement b

Frankfurt (dpa) - The Frankfurt stock exchange dropped plans Wednesday to merge with the pan-European bourse Euronext NV as a group of the world's leading investment banks announced moves to forge a new rival European share trading platform.

The German stock exchange operator Deutsche Boerse AG said it was pulling out of its long-running battle to buy Paris-based Euronext paving the way for the formation a new transatlantic share market.

However, Deutsche Boerse's statement coincided with an announcement by a consortium of several of the world's most powerful investment banks that were to create a new trading platform to rival Europe's major bourses - the London Stock Exchange, Deutsche Boerse and Euronext.

The move by the banks, which include Citigroup Inc, which is the US biggest financial services group and UBS AG, Europe's largest bank, is however likely to add to the pressure for consolidation among Europe's bourses to help trim costs and broaden the platform for share sales.

Along with Citigroup and UBS, the banks, which also include Credit Suisse Group, Deutsche Bank AG, Goldman Sachs Inc, Merrill Lynch & Co.Inc and Morgan Stanley, plan to launch the new platform next year.

The banks said that both money and resources had already been set aside for the project.

Their announcement came the wake of a new European Union directive aimed at promoting more competition in share trading and the creation of new trading platforms.

The consortium's proposed new share platform also follow similar moves in the US where big financial houses have been moving to establish their own trading systems.

Euronext, which operates bourses in Paris, Amsterdam, Brussels and Lisbon markets as well as the London derivative market LIFFE, said in June it planned to team up with the New York Stock Exchange (NYSE) in a landmark deal worth about 11 billion euros (14 billion dollars).

At press conference Wednesday, Deutsche Boerse chief Reto Francioni said his company was in a strong position with the decision to pull out of the Euronext bid opening up new opportunities for the Frankfurt-based group, including in the fast-paced economies of Asia and Central Europe, as well as joint ventures.

"We are free to go into all markets," he told reporters. "External growth is an option but not a necessity for Deutsche Boerse.

"Based on our very strong position in the industry, we will continue our successful organic growth path" Francioni added. "Nevertheless, we expect to take an active role in the consolidation process in our industry in Europe and beyond."

However, Deutsche Boerse's announcement that it was giving up its plans to buy Euronext resulted in the German group's shares plunging by more than 4 per cent as investors grew concerned about the Frankfurt market being sidelined in the new stock market landscape rapidly take shape in Europe.

But while Deutsche Boerse's stock slumped, the Frankfurt stock market's key index, the DAX surged to its highest level in more than five years Wednesday in part fuelled by market takeover speculation following the collapse of the Frankfurt bid for Euronext.

Despite being rebuffed earlier this year by Euronext and its decision to link up with New York, the plan for the creation of a new European-wide stock market received strong backing from Europe's political establishment including from German Chancellor Angela Merkel and French President Jacques Chirac.

Responding to the news that Deutsche Boerse was abandoning its merger bid, German Finance Minister Peer Steinbrueck described it as "a missed opportunity."

DPA

Subject: German news

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