* LSE to pay 15 euros a share
* LCH eyes 320 mln euro capital raising to boost regulatory
* Nasdaq to up LCH interest to 5 percent
LONDON, March 7 London Stock Exchange
has agreed a revised 328 million euro ($426 million) cash offer
to buy a majority stake in LCH Clearnet, in a long-delayed deal
aimed at beefing up the group's lucrative clearing and risk
Under the recommended offer, the LSE said it wants to
acquire up to a further 55.5 percent in LCH, which acts as a
middle man in financial trades and guarantees to complete deals
if one of the parties cannot.
Regulators called for a shake-up in the amount of capital
firms such as LCH must stockpile against their trading book
shortly after LSE's original offer, triggering a year of
renegotiating the deal.
The new offer is conditional upon the execution of a 320
million euro capital raising, which the LSE has pledged to
support with a further 185 million euros of fresh investment.
LCH investors who consent to the deal will receive 15 euros
per share, an offer that values the firm's issued share capital
at 633 million euros.
"We will promote greater innovation, choice and competition
in the risk management industry, especially in listed
derivatives. This ...will build upon the successes we have
already had with our existing equity and fixed income trading
partnerships," LSE Chief Executive Xavier Rolet said.
LSE will then own up to 57.8 percent of the firm, including
its current 2.3 percent stake, leaving other LCH shareholders
with at most 42.2 percent.
LSE's maximum total investment in LCH following the
fundraising will be 536 million euros, including a deferred
consideration of up to 23 million euros payable in 2017.
LSE's long pursuit of LCH reflects its ambition to expand
post-trade services for clients as trading in listed and 'over
the counter' (OTC) derivatives thrives against a backdrop of
dwindling stock market volumes.
Volumes in global exchange traded derivatives measured by
the number of contracts grew by around 12 percent between 2000
and 2012, while volumes in global OTC derivatives measured in
terms of notional value grew by around 17 percent.
Besides helping LSE to diversify its core equities trading
business, the deal is also expected to help LCH develop a new
listed fixed income derivatives platform, LSE said.
LCH shareholders representing almost 73 percent of the
firm's issued share capital have already indicated support for
the transaction, including core investor NASDAQ.
The New York-based exchange operator has agreed to increase
its LCH stake to 5 percent following the capital raising and its
Chief Executive Bob Greifeld will join the board of the enlarged
"For any central counter-party the active involvement of the
largest number of potential customers is critical so it is a
real positive that NASDAQ is taking a greater involvement," Mark
Thomas, analyst at Edison Investment Research, said in a note.
LSE shares were up 0.5 percent at 1,403 pence by 0855 GMT,
versus a 0.25 percent rise in the FTSE 100.