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Greek Bank stocks - >>> How 'Brexit' Could Hit Deutsche Boerse-London Exchange Merger



Ronald Orol

May 11, 2016



https://www.thestreet.com/story/13568272/1/how-brexit-could-hit-deutsche-boerse-london-exchange-merger.html?puc=yahoo&cm_ven=YAHOO



Investors should take a close look at how the potential of Great Britain pulling out of the European Union will play into the combination of Deutsche Boerse and the London Stock Exchange.

That's according to Reade Griffith, chief investment officer of Polygon's European event-driven fund. Griffith spoke Wednesday to a gathering of hedge fund titans at the annual SALT convention in Las Vegas.

He said the London Stock Exchange and Deutsche Boerse are currently trading at a narrow spread as investors anticipate their merger will be consummated. However, Griffith contends that if a "Brexit" takes place -- Britain votes on whether to leave the European Union June 23 -- prospects for LSE business becomes more complex, driving liquidity to Europe, a situation that will likely benefit Deutsche Boerse.

A vote for Brexit, he argues, would drive German shareholders to vote against the deal, which at the very least would need to be restructured. "The prospect of Brexit is not priced in at all in this deal," Griffith said.

However, he added that he didn't believe there is a good chance of Brexit taking place, arguing that U.K. online betting firms have the odds of Britain voters opting to separate at only between 25% and 30%, much less than what major U.K. polls estimate.

"Polls are imprecise," said Griffith.

In another part of Europe, Griffith said he is bullish on big Greek banks, which he argues are "incredibly cheap" relative to the rest of Europe, especially in light of positive prospects for negotiations between the International Monetary Fund and the German government over Greek debt relief.

At issue are prospects for the National Bank of Greece (NBGGY) , Piraeus, Alpha Bank and Eurobank.

"If the Germany and IMF resolve their dispute about what to do with Greek debt relief you have a rebound opportunity for the major Greek banks, which are now much better capitalized," he said. "And the Greek market, with essentially an oligopoly, is one of the best markets structurally in Europe. The upside is big and we're at a late stage."

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