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D.Boerse sets sights on pan-European stock market

Written by: Staff

FRANKFURT, Feb 22 (Reuters) Deutsche Boerse wants a merger with rival Euronext to create a truly pan-European securities market group, the German stock market operator's chief executive said on Wednesday.

''A merger between Deutsche Boerse and Euronext would be a major step towards integration of the European financial markets as a whole,'' CEO Reto Francioni told a news conference.

A merger would make strategic sense and create synergies, and cut down transaction fees, analysts said.

Elaborating on remarks about Deutsche Boerse's quest for talks with Euronext he had made in a statement on Tuesday, Francioni said the group he envisages would be ''a natural nucleus'' for further consolidation of European exchanges.

''We are inviting Euronext in particular and other potential partners to a continuation of a dialogue with the aim of achieving European stock exchange consolidation,'' he said.

A Euronext spokesman said the company, which runs the stock exchanges in Paris, Amsterdam, Brussels and Lisbon, would examine closely Deutsche Boerse's fresh merger talks invitation.

Kevin Byram told Reuters Euronext was open for talks but that differences of opinion with Deutsche Boerse remained.

Deutsche Boerse shares were 0.2 per cent higher at 105.79 euros by 1240 GMT (1810 IST) with Euronext up 0.5 per cent at 53.15 euros.

''We view the merger plans in a positive light as considerable synergy potentials are to be realised from jointly operating a trading infrastructure,'' Matthias Duerr, an analyst at German DZ Bank, said in a note.

''They (Deutsche Boerse) seem much keener on making the deal than Euronext,'' said Elie Darwish, an analyst at Exane BNP Paribas in Paris. ''There is strong pressure from shareholders.

''The option remains open even if it doesn't come in the next few months,'' he said, giving a merger a 30 per cent probability.

WITHIN REACH In case of a deal, and assuming a 50-50 split of the resulting synergy gains, fair value for Deutsche Boerse shares would be roughly 117 euros and for Euronext's 63 euros, he said.

Francioni said he was convinced that positive solutions were within reach but declined to give a timetable.

Deutsche Boerse's supervisory board had not been informed of the proposals for merger talks with Euronext, sources told Reuters.

The supervisory board met on Tuesday to review the company's fourth-quarter and full-year 2005 accounts.

''I can confirm that the supervisory board did not discuss the matter,'' said one source close to the board. ''We must see what Francioni actually wants. The supervisory board does not want a hostile bid,'' the source said.

Asked at the news conference why the supervisory board had not been informed, Francioni said that had not been necessary as Deutsche Boerse had not started any actual merger negotiations.

Consolidation would strengthen European securities markets in relation to non-European operators, particularly those in the United States, and would also make European capital markets more attractive for investors and issuers, Francioni said.

''A combination of Deutsche Boerse and Euronext would create the first truly European exchange organisation capable of asserting a claim to global leadership,'' he said.

Such a group would be Europe's biggest for cash market trading, overtaking the London Stock Exchange. In terms of derivatives trading, it would be the largest operator globally, Deutsche Boerse said.

''The combined group would create substantial value for its customers by considerably reducing system complexity from a customer's perspective through the integration and harmonisation of the trading infrastructure,'' Francioni said.

Deutsche Boerse and Euronext have said that they held cooperation talks but failed to come to terms. Francioni said a transaction ''must be economically compelling, strategically attractive and politically viable.'' REUTERS SD HS1959

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