Singapore exchange denies LSE merger talks

LONDON/SINGAPORE Fri Jul 20, 2012 7:44am EDT

Pedestrians walk past the London Stock Exchange in the City of London December 12, 2006. REUTERS/Stephen Hird

Pedestrians walk past the London Stock Exchange in the City of London December 12, 2006.

Credit: Reuters/Stephen Hird

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LONDON/SINGAPORE (Reuters) - The Singapore Exchange (SGXL.SI) (SGX) denied it was in talks to buy the London Stock Exchange (LSE.L), a sign there is little appetite for more large cross-border deals after several takeover attempts failed.

The two operators last week agreed to allow their clients to trade blue-chip shares on both platforms, the sort partnership SGX would prefer to costly acquisitions.

"SGX has not engaged in talks with the LSE on a potential merger. However, we are open to collaborations and partnerships which may benefit our shareholders and the company," the Asian exchange said on Friday.

The statement was a response to a story in Britain's Daily Telegraph, which said the two were in talks about a potential 7.2 billion pound ($11.3 billion) merger. The story was posted on the newspaper's website on Thursday.

The newspaper said a takeover would be in the region of 1,350 pence per share. LSE shares were below that price at 1,029 pence at 1127 GMT on Friday, indicating traders thought a deal unlikely.

The LSE declined to comment on Friday.

Stock exchanges worldwide are under pressure from new rivals that offer cheaper services and are looking for alternative ways to make money to traditional stock trading, which has been hit by the banking crisis and economic slowdown.

Many have tried to merge - an obvious way to cut costs - but few have succeeded after investors and authorities intervened.

SGX Chief Executive Magnus Boecker told the Financial Times in an interview he was open to further partnerships. But he was not so much thinking of mergers and acquisitions, he told the newspaper, but more on "products and services".

"Hopefully we can do more between London and SGX, like I can see us doing more with NYSE Euronext NYX.N and (Deutsche Boerse's (DB1Gn.DE)) Eurex and Nasdaq (NDAQ.O)," Boecker was quoted as saying in Friday's FT.

The LSE and the SGX have worked closely together in the past. They jointly bid to buy the London Metal Exchange, the world's largest metals exchange, though they lost out to the Hong Kong Exchange (0388.HK) last month.

DEALS FLOUNDER

A deal combining the London and Singapore bourses would have put it behind NYSE Euronext and Nasdaq OMX in terms of number of trades, but a takeover of Europe's oldest independent bourse would have faced stiff regulatory and political opposition.

Based on Thursday's closing prices, SGX is worth $5.7 billion, while LSE is worth $4.2 billion, making a combined market capitalization of $10.1 billion.

Several big takeover attempts have failed.

The LSE was forced to accept defeat in its 2.3 billion pounds plan to merge with Canada's TMX Group (X.TO) amid shareholder opposition in June last year.

SGX walked away from its proposed $7.8 billion merger with the Australian Exchange (ASX.AX) in April last year after the Australian government blocked the trade.

And the European Commission scrapped the $7.4 billion mega-merger of NYSE Euronext NYX.N and Deutsche Boerse (DB1Gn.DE) in February this year, citing competition concerns.

Smaller deals rather than cross-border mega-mergers were more feasible, Dominique Cerutti, president and deputy chief executive of NYSE Euronext told Reuters on Thursday.

"Consolidation among exchanges makes sense but there are major barriers to these deals," Cerutti said in an interview.

"Consolidation, however, will continue at a smaller scale through regional deals or strategic transactions to consolidate asset classes," he said.

The LSE plans to complete its acquisition of European clearing house LCH.Clearnet in the fourth quarter this year, a move to reposition the exchange to benefit from regulatory changes to mandate clearing of complex derivatives.

($1 = 0.6366 British pounds)

(Additional reporting by Denny Thomas in Hong Kong and Saeed Azhar in Singapore; Writing by Douwe Miedema in London and Lincoln Feast in Sydney; Editing by Erica Billingham)

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