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Posted by: dustybutler1 Date: Wednesday, October 22, 2008 11:40:27 AM
In reply to: None Post # of 114280
Published: October 22 2008 09:16 | Last updated: October 22 2008 09:16
Depository Trust and Clearing Corporation of the US and Europe’s LCH.Clearnet on Wednesday unveiled a merger that would create the world’s largest clearing house.
Under the transaction, DTCC, the largest US clearer, would acquire all of the shares in LCH.Clearnet, Europe’s largest independent clearing house. LCH.Clearnet shareholders would receive up to €10 a share, which gives the European group an equity value of €739m ($950m).
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Euroclear, LCH.Clearnet’s largest shareholder, is supporting the deal “in principle”.
DTCC and LCH.Clearnet said the proposed merger would create a “transatlantic clearing house of significant financial strength”, and should generate synergies worth 7-8 per cent of the combined group’s operating costs.
They added that customers – including banks, institutional investors, hedge funds and mutual funds – would benefit because the cost of clearing services would fall.
The range of asset classes covered would include equities, fixed-income instruments, exchange-traded derivatives and commodities, mutual funds, annuities and over-the-counter products such as credit default swaps.
Donald Donahue, DTCC chairman and chief executive, said: “By combining DTCC and LCH.Clearnet’s natural synergies and complementary skills, we expect our customers will not only see significant cost savings in the clearance and settlement of many securities and instruments we already service, but also greater access to a more diverse range of product offerings and support of emerging asset classes.”
Chris Tupker, LCH.Clearnet chairman, said: “The merger of our companies will enable our users to benefit from a broader geographic footprint and a greater range of expertise as well as realising important efficiencies and economies of scale.”
DTCC and LCH.Clearnet said they had signed non-binding merger terms under which DTCC will acquire all of LCH.Clearnet’s shares.
Under the deal, LCH.Clearnet shareholders would receive up to €10 a share in a combination of DTCC voting shares, shares in the vehicle acquiring LCH.Clearnet, and a special dividend from LCH.Clearnet. It implies an equity value for LCH.Clearnet of €739m.
The new DTCC shares issued to LCH.Clearnet shareholders would leave them with a 34 per cent stake in the US clearing house’s enlarged equity.
DTCC and LCH.Clearnet expect to continue negotiations on the proposed merger so that detailed terms can be announced by next March.
LCH.Clearnet is to have “significant” representation, including management, on the DTCC board.
Roger Liddell, LCH.Clearnet’s chief executive, would be chief executive of LCH.Clearnet Holdco, the acquisition vehicle, while Mr Donahue would be chairman.
