Germans demand London Stock Exchange moves group headquarters to Frankfurt

The group headquarters of the London Stock Exchange and its German counterpart Deutsche Boerse should be in Frankfurt and not London after the pair have merged, Thomas Schaefer, the finance minister of Hesse, the state in which Frankfurt is located, has claimed.

Deutsche Boerse is the larger company but the combination has been carefully set up as a merger rather than a takeover. The decision to place the headquarters in London was part of that arrangement.

But it is unpopular with German politicians and regulators who fear a loss of influence, and Mr Shaefer has stepped forward to attempt to undo that agreement just weeks before the companies hoped to get regulatory approval to go ahead with the merger.

"The reasons for the headquarters being in Frankfurt are crystal clear," Mr Schaefer said. 

"Those involved in London must recognize, also in their own interests, that it would not be a good idea to keep the plans as they are now.”

Both companies have recently insisted that the terms of the deal are set, and it has been noted that the Takeover Panel may object to last minute changes.

Regulatory approval is still required from the authorities in Hesse and the European Commission, however.

The new demand comes after Hesse prosecutors raided the office and apartment of Carsten Kengeter, the chief executive of Deutsche Boerse who is in line to become CEO of the combined group.

Prosecutors claim that Mr Kengeter could have broken insider trading rules by buying €4.5m of shares in Deutsche Boerse in December 2015, two months before the merger plan was made public.

Deutsche Boerse’s chairman denied the prosecutors’ claims, in particular rejecting the idea that bosses had been in talks since the summer of 2015.

“The allegations have no basis. Carsten Kengeter purchased the shares according to a compensation programme limited to December 2015 and agreed on by the Supervisory Board,” said Joachim Faber, the chairman of Deutsche Boerse’s supervisory board.

“The chairmen and CEOs of both LSE Group and Deutsche Boerse only agreed in the second half of January 2016 to enter into merger negotiations.”

Both exchanges are also sensitive to any threats which could knock the deal off course as several previous attempted mergers fell apart in recent years.