FRANKFURT Deutsche Boerse's (DB1Gn.DE) works council refuses to back a merger proposal with NYSE Euronext NYX.N, two people familiar close to the company said on Tuesday.
Council members fear that key responsibilities would migrate to New York and that Deutsche Boerse is not getting an adequate premium for the derivatives, clearing and settlement businesses it would bring to the combined group, one of the sources said.
Works councils in Germany are panels of elected employee representatives that assist workers and push their interests.
The lack of support by labor representatives is not enough to block the merger but undermines Deutsche Boerse's campaign to convince German regulators that a deal strengthens Frankfurt as a financial center.
The state of Hesse's Ministry of Economics in the city of Wiesbaden, which bestows the license to operate a stock exchange, still needs to give its approval of the deal.
Dieter Posch, the Hessian minister of Economics, said in February he would use "adequate means" to defend Frankfurt's interests as a financial center in the proposed merger deal after meeting with the group's works council.
Deutsche Boerse is close to releasing formal statements by the management and the supervisory board to endorse the transaction, a formal part of German corporate governance in a takeover situation.
In negotiations to formulate the official statements, it emerged that the works council representatives refuse to recommend the potential merger with the operator of the New York Stock Exchange, the sources said.
Deutsche Boerse declined to comment.