LCH.Clearnet will begin a campaign this week to persuade shareholders it has received a better takeover offer from the London Stock Exchange (LSE: LSE.L - news) — even though the headline price has dropped by 21pc.
Last Monday, LSE announced that it was reducing its offer from €20 (£16) a share to just €14 plus a €1 special dividend .
Analysts suggested that the “new deal” represented a bargain for LSE as the London bourse would save €97.6m for its 60pc stake in LCH.Clearnet.
However, LCH will point out that LSE is committed to “up to 60pc” of a €300m capital raising. This could mean an additional €180m if the LSE takes up its full rights. Shareholders have yet to vote on the new offer.
The original €20 a share bid valued LCH.Clearnet at €813m . According to LSE’s March announcement this consisted of €19 per share in cash from LSE and a special dividend from LCH.Clearnet. The result is that under the first offer, LSE’s 60pc stake would have cost it €463m.
Under the reduced offer, LCH.Clearnet’s valuation drops to €609m, while the implied value of the LSE’s stake is just €365m.
However, because the LSE has now committed to the rights issue, the London bourse may have to stump up an extra €180m.
If the LSE chose to take up its full rights, then the total spend on LCH.Clearnet will rise to €545.4m 18pc more than LSE would have spent under the original terms.
Regulators are keen to force banks to channel their trades through clearing houses to help monitor risk positions.
However, under new European regulations, clearing houses will be forced to hold more capital so there is a bigger financial buffer in the case of default. In September, LCH.Clearnet estimated it would need an additional €300m to €375m to meet the requirements.