LONDON (Reuters) - London Stock Exchange Group (LSE.L) has submitted a revised 284 million pounds ($426.4 million) cash offer to buy a majority stake in LCH Clearnet, in a deal aimed at giving the exchange a gateway into the lucrative debt and currency clearing business.
Under the terms of the recommended offer, the LSE said it wants to acquire up to a further 55.5 percent in LCH, which makes money by acting as a middle man in financial trades and guaranteeing to complete deals if one of the parties cannot.
LCH investors who consent to the deal will receive 15 euros per share, an offer that values the firm’s total 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, Turquoise and MTS,” LSE Chief Executive Xavier Rolet said in a statement.
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 least 42.2 percent.
LCH will subsequently look to raise 320 million euros of fresh capital from its revamped shareholder base in order to meet demands from regulators to hold more capital against its trading activities.
LSE has committed up to 185 million euros to the fundraising, taking its maximum total investment to 536 million euros, including a deferred consideration of up to 23 million euros to be paid in 2017.
Both parties have received non-binding letters of support and indications of intent from core LCH shareholders representing almost 73 percent of the current LCH issued share capital to support the transaction.
NASDAQ (NDAQ.O) has agreed to increase its LCH stake to 5 percent following the capital raise and its Chief Executive Bob Greifeld will join the board thereafter.
Reporting by Sinead Cruise, editing by Tommy Wilkes