(Corrects value of offer to 312 million euros in first and
By Luke Jeffs
LONDON Dec 19 The London Stock Exchange
has cut its offer for LCH.Clearnet by almost a third to 312
million euros ($413.7 million), to reflect rising capital
requirements, sources familiar with the matter said on
Sources said the British stock market has made a revised
offer of about 13 euros a share, down about 6 euros on the deal
it agreed with LCH management and shareholders in April.
The deal is important to the LSE because it takes the
British exchange further into clearing, a potentially lucrative
area, with regulators looking to mandate the use of clearing
houses in the wake of the collapse of Lehman Brothers.
The LSE said on Wednesday it was in talks with LCH over the
"potential changes to the commercial terms of the transaction"
but declined to comment further. LCH also declined to comment.
The reduced offer needs to be accepted by the LCH board and
then it will have to go back before LCH shareholders, who are
not guaranteed to accept the lower bid, according to analysts.
LCH.Clearnet shareholders include nearly 100 of the world's
largest trading banks and two exchanges, the London Metal
Exchange and NYSE Euronext.
"It'd be positive if it could secure a price reduction on
this scale," said Richard Perrott, an analyst at Berenberg Bank.
The LSE was forced to renegotiate the deal to reflect
proposals by European regulators to introduce higher capital
charges on clearing houses, such as LCH, next year.
Analysts expect LCH's capital shortfall will be less than
early estimates and should come in at about 220 million euros.
The LSE would only need to pay 60 percent of that, but that
would still leave it on the hook for at least 100 million euros,
which its shareholders will want factored into the terms of the
The reduction in offer price to 13 euros a share means the
LSE's offer for the 60 percent of LCH shares has fallen from
about 460 million euros to about 312 million euros.
"While we have previously believed a cut in the purchase
price was warranted and likely, we are surprised - and pleased -
that the size of the cut is so substantial," said Peter
Lenardos, an analyst at RBC Capital Markets.
Clearing houses sit between trading firms and ensure trades
of securities such as stocks and bonds are completed, holding
cash to refund firms left out of pocket by a counterparty
They have taken on greater importance since the collapse of
Lehman Brothers four years ago and regulators want to force more
trading through such vehicles to ensure smoothly functioning
markets even at times of stress.
($1 = 0.7568 euros)
(Editing by Louise Heavens)