Deutsche Boerse AG
27 January 2005
Not for release, publication or distribution, in whole or in part, in, into or
from
Canada, Australia or Japan
27 JANUARY 2005
PROPOSED PRE-CONDITIONAL CASH OFFER BY DEUTSCHE BORSE
FOR THE LONDON STOCK EXCHANGE PLC
SUMMARY
Deutsche Borse announces details of a proposed pre-conditional cash offer
of not less than 530 pence for each ordinary share of the London Stock Exchange.
The Offer is subject to the sole pre-condition that the Board of the London
Stock Exchange resolves to give an unqualified and unconditional recommendation
to its shareholders to accept the Offer. Deutsche Borse reserves the right to
waive, in whole or in part, the above pre-condition;
The proposed transaction would create the pre-eminent markets company in
Europe and would provide the opportunity for the New Group to become the first
global exchange organisation. The Executive Board believes the New Group would
have leading positions in the cash and derivatives markets, the clearing,
settlement and custody businesses and exchange data distribution;
Deutsche Borse is committed to ensuring the continued operation of the
London equity market in a manner consistent with past practice while delivering
improvements and benefits to all stakeholders;
The London Stock Exchange would continue to be solely regulated by the
FSA. Established market models including the AIM market would be supported and
maintained. Sterling would remain the trading currency for UK stocks and London
would be promoted as the primary destination for the listing and trading of UK
and non-European stocks;
Deutsche Borse intends to agree a long term arrangement with CRESTCo to
ensure continuity for its well accepted and efficient services for clearing and
settlement. In addition, if the transaction takes place, Deutsche Borse would be
prepared to offer an immediate one year extension of the existing contract with
LCH.Clearnet as the provider of the guarantee function for the London equity
market in return for a material price reduction for the benefit of the customers
of the London Stock Exchange. If the proposed transaction takes place, Deutsche
Borse commits that any operational changes to the London market that have a
material impact on the economics of customers' operations in the London cash
equity market would be subject to a formal approval process. Any such proposal
would be initiated by the management of the London Stock Exchange and would
require approval by the Board of the London Stock Exchange;
Deutsche Borse intends to offer customers of the London Stock Exchange
immediate cost reductions as follows:
• the cost of current tariff structures for electronic order book trading
in the UK would be reduced by 10% overall as of 1 January 2006. Prices would
be capped at the new levels for at least five years and would be expected to
be further reduced in the future. Moreover, Deutsche Borse would guarantee
that these fees will never exceed current levels;
• with respect to clearing, Deutsche Borse would put in place an
alternative offer to the London market to provide LCH's clearing guarantee
at a price 50% lower than the price currently charged by LCH.Clearnet; and
• in the area of information services, the New Group would offer a 10%
price reduction to customers who subscribe to a combined UK and German data
package;
Regulation of the London Stock Exchange would be unchanged and new
customer-oriented governance procedures would be put in place:
• Deutsche Borse is determined to ensure that customers represent a
significant proportion of the Board of the London Stock Exchange as well as
having the appropriate number of directors who are genuinely independent of
both the exchanges and their customers. In addition, the Executive Board of
Deutsche Borse intends that the Board of the London Stock Exchange would be
chaired by an independent chairman;
• any operational changes to the London market that have a material impact
on the economics of customers' operations in the London cash equity market
would be subject to the approval of both the Board of the London Stock
Exchange and the New Group's Executive and Supervisory Boards;
• the Supervisory Board of Deutsche Borse currently comprises of fourteen
shareholder-elected representatives and seven worker-elected
representatives. If the proposed transaction takes place, Deutsche Borse
would commit that new candidates would be nominated such that seven of the
fourteen shareholders' representatives would have close ties to the City of
London; and
• the Executive Board members responsible for the Cash Equities,
Derivatives and Clearing businesses would be resident in London. These
activities represent approximately 45% of the New Group's pro forma revenues
for the financial year 2003;
Deutsche Borse has a track record of successfully combining businesses and
delivering on its synergy targets. The Executive Board estimates that a
combination with the London Stock Exchange would lead to an additional
contribution to profit before tax from revenue and cost synergies of at least
€100 million per annum which is expected to be achieved in the third financial
year (2008) following completion of the transaction. Of this €100 million,
approximately €25 million per annum is estimated to come from revenue synergies
and approximately €75 million per annum from reduced costs. Total restructuring
costs are expected to be less than €100 million;
The Executive Board of Deutsche Borse estimates that the combination would
lead to accretion in its earnings per share (before implementation costs) in the
first full financial year after completion of the transaction. In addition, the
pro forma return on investment in the first full financial year after completion
of the transaction, including full run rate synergies, is expected to be
approximately 8%, which exceeds the Group's anticipated cost of capital;
The Executive Board also believes that the strong cash flow generation of
the New Group would facilitate the continuation of the progressive dividend
policy of Deutsche Borse, maintaining a strong AA credit rating and facilitate
the implementation of a share buyback program by the end of 2006;
Listing and trading activities as well as regulation in the Frankfurt
market would be entirely unaffected by the proposed transaction and would remain
unchanged. Deutsche Borse would continue to be incorporated in Germany with its
global headquarters in Frankfurt;
In summary, key stakeholders should expect to benefit from the proposed
transaction, as follows:
• shareholders would benefit from significant synergies and the creation
of a balanced business with enhanced growth opportunities;
• customers would benefit from immediate price reductions and the
introduction of new competitive products for the UK market; and
• issuers and investors are expected to benefit from increased trading
activity and liquidity which should ultimately lead to a reduction in the
cost of capital for issuers.
This announcement is being made in order to facilitate discussions with the
customers, shareholders and other stakeholders of the London Stock Exchange and
Deutsche Borse. Following such discussions and prior to making the formal offer,
Deutsche Borse reserves the right to amend any or all elements of the Offer and
proposals to customers, shareholders and other stakeholders, save that it would
not reduce the price. This announcement does not constitute an offer or
invitation to purchase any securities or a firm intention to make an offer
pursuant to Rule 2.5 of the City Code on Takeover and Mergers. There can be no
guarantee that such an offer will be made.
Commenting on the transaction, Werner Seifert, Chief Executive Officer of
Deutsche Borse said:
'This combination would create a broad-based, innovative leader in the provision
of services to customers of both companies world-wide. Next to obvious cost
synergies, it is first and foremost a proposal to realise manifold growth
opportunities in Europe and globally. The European capital market will become
more efficient, to the benefit of issuers, investors and intermediaries. It is
Deutsche Borse's intention to respect and build upon the valuable heritage of
the London Stock Exchange and Deutsche Borse to the benefit of the stakeholders
of both organisations, in particular customers and shareholders. Our expanded
product portfolio, combined expertise, and management team will enable the new
group to be a truly global player in our industry.'
This summary should be read in conjunction with the full text of the following
announcement, including its appendices. Appendix IV to the following
announcement contains definitions of certain terms used in this summary and the
following announcement.
Enquiries
Deutsche Borse Tel: +49 69 211 11500
Walter Allwicher
Candice Adam
Frank Hartmann
Goldman Sachs International
(Financial Adviser and Corporate Broker to Deutsche
Borse)
Wayne Moore Tel: +49 69 7532 1000
Wolfgang Fink
Chris Williams Tel: +44 20 7774 1000
Basil Geoghegan
The Maitland Consultancy Tel: +44 20 7379 5151
(PR Adviser to Deutsche Borse)
Angus Maitland
Colin Browne
Goldman Sachs International is acting exclusively for Deutsche Borse Group in
connection with the Offer and no one else and will not be responsible to anyone
other than Deutsche Borse Group for providing the protections afforded to
clients of Goldman Sachs International nor for providing advice in relation to
the Offer or in relation to the content of this announcement or any transaction
referred to herein.
Deutsche Borse Group may purchase London Stock Exchange Shares otherwise than
under the Offer, such as in open market or privately negotiated purchases. Such
purchases may be made either directly or through a broker and such purchases
shall comply with the applicable laws of the United Kingdom as well as the rules
of the London Stock Exchange and the UK Takeover Code. Deutsche Borse Group
shall disclose in the United Kingdom, the United States and Germany by means of
a press release such purchases of London Stock Exchange Shares outside the Offer
as required by applicable UK law as well as the rules of the London Stock
Exchange and the UK Takeover Code.
The Offer in the United States, if made, is expected to be made solely by
Deutsche Borse Group pursuant to an exemption from the US tender offer rules
provided by rule 14d-1(c) under the US Securities Exchange Act 1934, as amended.
Neither Goldman Sachs International nor any of its respective affiliates will
make the Offer in the United States.
This announcement does not constitute an offer or an invitation to purchase any
securities. The availability of the Offer and the Loan Note Alternative to
persons outside the United Kingdom may be affected by the laws of the relevant
jurisdictions. Persons not resident in the United Kingdom, or who are subject to
the laws of any other jurisdiction, should inform themselves about and observe
any applicable requirements. Further information in relation to overseas
shareholders will be contained in the formal Offer Document.
Unless otherwise determined by Deutsche Borse Group, the Offer, if made, will
not be made, directly or indirectly, in or into, or by the use of mails of, or
by any means or instrumentality (including, without limitation, telephonically
or electronically) of interstate or foreign commerce of, or any facilities of a
national securities exchange of, Canada, Australia or Japan or any other
jurisdiction if to do so would constitute a violation of the relevant laws of
such jurisdiction and the Offer will not be capable of acceptance by any such
use, means, instrumentality or facilities or from or within Canada, Australia or
Japan or any such other jurisdiction. Accordingly, neither this announcement nor
the formal Offer Document nor any related documents are being, and must not be,
directly or indirectly, mailed or otherwise forwarded, distributed or sent in or
into or from Canada, Australia or Japan or any such other. Any person
(including, without limitation, any nominee, trustee or custodian) who would, or
otherwise intends to, or who may have a contractual or legal obligation to,
forward this announcement, the formal Offer Document and/or any related document
to any jurisdiction outside the United Kingdom should refrain from doing so and
should seek appropriate professional advice before taking any action.
The Loan Notes have not been, and, if issued, will not be, registered under the
United States Securities Act of 1933 (as amended) or under any relevant
securities laws of any state or other jurisdiction of the United States; nor
have the relevant clearances been, nor will they be, obtained from the
securities commission of any province or territory of Canada; nor has any
prospectus been lodged with, or registered by, the Australian Securities and
Investments Commission nor have any steps been taken, nor will any steps be
taken, to enable the Loan Notes to be offered in compliance with applicable
securities laws of Japan. Accordingly, the Loan Notes, if issued, may not be
offered, sold, resold or delivered, directly or indirectly, in or into the
United States, Canada, Australia or Japan or any other jurisdiction if to do so
would constitute a violation of the relevant laws in such jurisdiction or
require registration thereof, or to, or for the account or benefit of, any US
Person or resident of Canada, Australia or Japan.
Not for release, publication or distribution, in whole or in part, in, into or
from
Canada, Australia or Japan
27 JANUARY 2005
PROPOSED PRE-CONDITIONAL CASH OFFER BY DEUTSCHE BORSE
FOR THE LONDON STOCK EXCHANGE PLC
1 The Offer
On 13 December 2004, Deutsche Borse announced that it had made a proposal to the
Board of the London Stock Exchange plc regarding a possible offer for the London
Stock Exchange. Today, Deutsche Borse announces the detailed terms of a proposed
pre-conditional cash offer by Deutsche Borse (or a wholly owned subsidiary of
Deutsche Borse) for the London Stock Exchange, which is subject to the sole
pre-condition that the Board of the London Stock Exchange resolves to give an
unqualified and unconditional recommendation to its shareholders to accept the
Offer.
Under the terms of the Offer, London Stock Exchange Shareholders would receive
not less than 530 pence per share for each London Stock Exchange Share. The
terms of the Offer value the issued and to be issued share capital of the London
Stock Exchange at approximately £1.4 billion. The formal offer announcement will
only be made following the satisfaction or waiver of the pre-condition, namely
that the Board of the London Stock Exchange resolves to give an unqualified and
unconditional recommendation to its shareholders to accept the Offer. Deutsche
Borse Group reserves the right to waive, in whole or in part, the above
pre-condition.
This announcement is being made in order to facilitate discussions with the
customers, shareholders and other stakeholders of the London Stock Exchange and
Deutsche Borse. Following such discussions and prior to making the formal offer,
Deutsche Borse reserves the right to amend any or all elements of the Offer and
proposals to customers, shareholders and other stakeholders, save that it would
not reduce the price. This announcement does not constitute an offer or
invitation to purchase any securities or a firm intention to make an offer
pursuant to Rule 2.5 of the City Code on Takeover and Mergers. There can be no
guarantee that such an offer will be made.
Goldman Sachs International is acting as financial adviser and corporate broker
to Deutsche Borse Group in relation to the Offer.
The Offer will be financed from Deutsche Borse Group's cash balances and from
fully underwritten loan facilities from Deutsche Bank and Goldman Sachs
International. It is proposed that part of the consideration to be paid under
the Offer will be refinanced by way of a bond issue after closing of the
transaction.
The Executive Board of Deutsche Borse estimates that the combination would lead
to accretion in its earnings per share (before implementation costs) in the
first full financial year after completion of the transaction. In addition, the
pro forma return on investment in the first full financial year after completion
of the transaction, including full run rate synergies, is expected to be
approximately 8%, which exceeds the Group's anticipated cost of capital.
The Offer would be subject to the terms and conditions set out in Appendix I and
Appendix II to this announcement and to the further terms to be set out in the
formal Offer Document and (in respect of London Stock Exchange Shares in
uncertificated form) the Form of Acceptance.
2 Information on the London Stock Exchange
The London Stock Exchange is the most international equities exchange by trading
in the world and oversees Europe's largest pool of liquidity. At the financial
year end 2004, 2,693 companies were listed on the London Stock Exchange
including 439 overseas issuers from 58 countries. It owns 76% of EDX, a UK
derivatives exchange, and holds a 50% stake in FTSE, an international index
company. In addition, the London Stock Exchange provides the trading system for
the Johannesburg Stock Exchange. For the year ended 31 March 2004, the London
Stock Exchange had revenues of £250.4 million (€360.5 million) resulting in EBIT
of £83.0 million (€119.5 million) and had 522 employees.
3 Information on Deutsche Borse
Deutsche Borse operates a multi-function, multi-product, and multi-market
business model. It is the operator of the Frankfurt Stock Exchange, has an 85%
economic interest in Eurex, the world's leading derivatives exchange and is the
owner of Clearstream, which is for the most part a fixed income International
Central Securities Depository (ICSD) and which also fulfils the Central
Securities Depository (CSD) function for the German and Luxembourg equity
markets. As part of its Market Data & Analytics segment, it holds a 33% stake in
STOXX Limited, a joint venture with Dow Jones & Company, Inc. and SWX Group.
STOXX is the leading provider of pan-European equity indices and owns an 18%
interest in International Index Company, a joint venture with nine banks
providing the fixed income and credit derivatives indices, 'iboxx' and 'itraxx'.
In addition, Deutsche Borse provides transaction and support services to sixteen
cash and derivatives markets for on-exchange and OTC (over-the-counter) trading
covering equities, bonds and commodities, including the cash equity markets in
Dublin and Vienna and the derivatives market in Helsinki.
For the year ended 31 December 2003, Deutsche Borse had revenues of €1,419.4
million resulting in EBIT of €452.6 million. Deutsche Borse has 3,233 employees
from 57 countries around the world. Since its initial public offering (IPO),
Deutsche Borse has outperformed the DAX index by 71.8% and the DJ EuroStoxx
index by 61.8%. As at 31 December 2004, Deutsche Borse had a market
capitalisation of approximately €5.0 billion with favourable long-term senior
credit ratings from Moody's (Aa1) and Standard and Poor's (AA+).
4 Previous Discussions
Deutsche Borse's working relationship with the London Stock Exchange began in
1998, when both exchanges successfully led the European markets to harmonise
functionality and rule books in equity trading. The relationship intensified as
the benefits of a combination between the London Stock Exchange and Deutsche
Borse became apparent to both organisations. In May 2000, Deutsche Borse and the
London Stock Exchange signed a merger agreement to form iX International
Exchanges. The combination was disrupted by an unsolicited bid for the London
Stock Exchange made by the Swedish exchange and technology company, OM Group.
Since then, both Deutsche Borse and the London Stock Exchange have successfully
obtained public listings in their respective markets.
In June 2003, the London Stock Exchange invited Deutsche Borse to re-enter
negotiations with the objective of agreeing a significant corporate transaction.
These discussions led to a complex proposal, of which the key elements were:
the London Stock Exchange would acquire a 20% stake in Eurex, which would
provide clearing services for the UK equity market at a 40% discount to the then
prevailing LCH.Clearnet price schedule; and
Eurex would launch its own UK derivatives business, creating new trading
opportunities for customers of the London Stock Exchange.
At that time, Deutsche Borse and its advisers valued the 20% stake in Eurex,
including the clearing and new UK derivatives business, in excess of €730
million. However the Board of the London Stock Exchange rejected this proposal
and accordingly discussions were terminated in November 2003. There was a
subsequent reduction of only 25% to the then prevailing LCH.Clearnet price
schedule.
5 A World Class Combination
The proposed transaction would create the pre-eminent markets company in Europe
and would provide the opportunity for the New Group to become the first global
exchange organisation. The Executive Board believes that the New Group would
have leading positions in the cash and derivatives markets, the clearing,
settlement and custody businesses and exchange data distribution. In addition,
the Executive Board believes that it would oversee the highest trading volumes
in all pre-eminent European equity markets, operate the world's leading
derivatives exchange and become a leading global player in the production,
refinement and distribution of market and reference data. Together, the New
Group would have unparalleled access to international customers and expertise in
developing and operating markets.
Consistent with the multi-market nature of its asset and skills base, Deutsche
Borse would propose to change the corporate name of Deutsche Borse following
completion of the proposed transaction. In addition, the internationally
recognised London Stock Exchange brand would be promoted and would become
central to a portfolio of leading securities markets brands, including Eurex and
Clearstream.
In terms of both revenue and profits, the New Group would be the largest listed
exchange organisation in the world with pro forma combined 2003 sales of
approximately €1.8 billion and pro forma combined 2003 EBIT of €0.6 billion. The
Executive Board estimates that the New Group would generate approximately one
third of its pro forma revenues from customers in the United Kingdom,
approximately one third from customers in Germany and the balance from other
international customers. It would also have substantial financial flexibility:
following the transaction, the Executive Board expects the New Group would have
strong investment grade long-term senior debt ratings from the major credit
rating agencies.
The geographic scope of the New Group would be materially enhanced, benefiting
from a network of more than 3,000 customers, a level greater than any other
exchange organisation in the world. The New Group would have significant
operations in London, Frankfurt, Luxembourg, Madrid, Chicago and Zurich,
representative offices in major financial centres such as New York and Hong
Kong, and other regional offices in Berlin, Dubai, Paris and Stockholm. Deutsche
Borse intends that London would be established as the centre for customer facing
activities in Cash Trading, Derivatives Trading and Clearing Services of the New
Group. Approximately half of the New Group's employees would be located outside
Germany.
The New Group would be a leading provider of IT services for exchange
organisations and its customers and would operate markets in the UK, Germany,
Austria, Ireland, Finland, the US and South Africa. The Executive Board expects
the transaction to enhance further the Group's attractiveness as an in-sourcing
partner for the global securities industry.
Upon completion, Deutsche Borse intends to seek its listing for its shares on
the London Stock Exchange whilst maintaining its listing on the Frankfurter
Wertpapierborse (Frankfurt Stock Exchange). The Executive Board expects that
this will encourage the continued internationalisation of its shareholder base.
Currently, Deutsche Borse has a free float of 100%, and approximately 50% of its
shares are held by UK and US based institutions.
6 Building On A Proven Ability To Deliver Growth And Innovation
Deutsche Borse has a track record of successfully combining businesses to create
new market opportunities and to capitalise on potential synergies. In 1998,
Deutsche Borse created Eurex by combining its derivative operations, DTB, with
SOFFEX, the derivative operations of the Swiss Exchange. This cross border
merger was accomplished by integrating two trading systems and operations into a
new state of the art trading platform which today handles in excess of 1.1
billion contracts a year, more than any other exchange in the world. In
completing this merger, Deutsche Borse, the Swiss Exchange and Eurex management
have been able to satisfy the requirements of both Swiss and German national
regulators, as well as the demands of their respective customer bases. While DTB
had been able to capture the majority of the liquidity in the long term Bund
interest rate futures market in 1998, the merger and advanced design of the
system were so successful that Eurex was able to quickly double the volume of
the overall market in these instruments. Deutsche Borse regularly upgrades its
platforms in response to the needs of the markets, ensuring smooth transitions
from release to release. Deutsche Borse has successfully implemented and
operates interfaces to a variety of other clearing and settlement systems
globally.
Deutsche Borse has a long standing track record of innovation, leadership and
service excellence. By constantly renewing its product portfolio, technology and
service offerings, it has helped its customers execute their business more
efficiently and provided them with new business opportunities. For instance,
Eurex was the first to introduce remote clearing to its customers in Europe and,
by implementing the Global Clearing Link between Eurex Clearing and The Clearing
Corporation, developed this concept to an even more advanced level.
7 The London Market
Deutsche Borse is committed to ensuring the continued operation of the London
market in a manner consistent with past practice, while delivering improvements,
particularly in the short-term in the areas of customer costs and in the
longer-term by upgraded systems capability and platform functionality. The
Executive Board is convinced that it can achieve these twin goals while also
enabling a higher degree of customer governance over the future direction of the
London Stock Exchange than currently exists.
Trading
Deutsche Borse intends to ensure that the New Group preserves the existing
market model in London, as follows:
•The London Stock Exchange would continue to be solely regulated by the
Financial Services Authority ('FSA');
•Established market models, including AIM would be supported and
maintained;
• Sterling would remain the trading currency for UK stocks; and
•London would be promoted as the primary destination for the listing and
trading of UK and non-European stocks.
Deutsche Borse intends that the New Group would support multiple types of
business and economic models. In order for customers to maintain their existing
business models and to maximise customer benefits, Deutsche Borse intends that
the New Group will continue to offer a broad set of execution mechanisms
specific to different market segments as they are offered today.
Deutsche Borse intends that the trading of liquid stocks using the central limit
order book mechanisms currently in place in the UK market would continue. For
less liquid instruments, hybrid models with liquidity provision in the order
book, as well as market making models involving specialists for the price
discovery, would continue to exist. This would include the ongoing support and
maintenance of established and successful market models such as the Retail
Service Provider model for private client stockbrokers. Deutsche Borse also
intends to maintain AIM, the successful London market for small companies.
UK and German issuers would continue to be able to be listed in their local
market but are expected to benefit from greater investment demand and enhanced
visibility due to facilitated access for investors and intermediaries.
Deutsche Borse is also dedicated to providing intermediaries with seamless
access to both the London and Frankfurt markets. This would be achieved through
a single trading infrastructure, combining the two existing trading platforms
into a next generation system.
Clearing and Settlement
In any market, the seamless process-flow from trading to clearing to settlement
is an important part of market efficiency. Deutsche Borse has a long history of
efficiency, using a variety of different formats. While there are advantages to
the proactive management of all layers in a multi-functional business model,
Deutsche Borse has long standing experience of operating with other formats.
Eurex Clearing AG, part of the Eurex joint venture between Deutsche Borse and
SWX Swiss Exchange AG, provides clearing services to Eurex and the Frankfurt
Stock Exchange markets. In other markets where Deutsche Borse operates the
trading system, clearing and settlement services are provided by third parties
unaffiliated with Deutsche Borse. For example, trades on the Irish Stock
Exchange are settled via CREST and trades on the Vienna Stock exchange are
settled via the Oesterreichische Kontrolbank (OeKB). In addition, Eurex US is
using the services of The Clearing Corporation, an independent user-controlled
clearing house in Chicago.
Deutsche Borse commits that the New Group will maintain existing clearing and
settlement processes based on existing arrangements between the London Stock
Exchange and clearing and settlement providers in the UK value chain.
The Executive Board recognises and appreciates the important role CRESTCo plays
in the UK straight-through post-trade chain. CRESTCo has been instrumental in
implementing an equity central counterparty functionality for the UK market
which delivers netting efficiency for the London Stock Exchange's customers. If
the transaction takes place, Deutsche Borse intends to agree a long term
arrangement with CRESTCo to ensure continuity for its well accepted and
efficient services. To this end, Deutsche Borse has initiated discussions with
CRESTCo and is prepared to enter into arrangements to secure these services.
In addition, if the transaction takes place, Deutsche Borse would be prepared to
offer an immediate one year extension of the existing contract with LCH.Clearnet
as the provider of the guarantee function for the London equity market in return
for a material price reduction for the benefit of the customers of the London
Stock Exchange.
As well as these contractual commitments, any change to the clearing and
settlement processes in London would be subject to new governance procedures
which are described below under 'Governance and Regulation' and to discussion
with the FSA.
Information Technology
Deutsche Borse has leading in-house information technology and operations
capability in the industry. Its main trading systems, Xetra and Eurex, provide
excellent levels of reliability and performance to market participants.
The development of a single IT platform supporting two leading cash equity
markets in Europe, London and Frankfurt would be an integral part of this Offer.
The proposed combination would create the largest equity trading platform
outside the US and enable significant reductions in operating and trading costs
in the UK market over time. The migration to a single trading platform would be
carried out in a non-disruptive way for customers of both the London Stock
Exchange and Deutsche Borse, effectively protecting existing infrastructure
investments of customers in both markets.
The Executive Board sees an unprecedented opportunity for the New Group to
leverage further its leading position in cash and derivatives markets. Cash and
derivatives markets have become increasingly integrated, with traders executing
combined orders in both markets. Over time, the Executive Board envisages that
the trading platforms for cash and derivatives markets are combined in a next
generation trading system which would reduce costs further by operating a single
platform, executing combined orders in integrated order-books between cash and
derivatives markets at lower costs while reducing execution risk.
The New Group would be committed to the objective of being the first exchange
organisation to offer such a system to the market. Whilst Deutsche Borse has
extensive in-house capability in the systems arena, it has historically worked
with external partners in developing new systems. Deutsche Borse is willing to
use third party providers for all or parts of such a system and will be
committed to achieving the best solution for the market in the shortest
timeframe and at the lowest cost.
Once implemented, this market structure would be continuously developed in close
co-ordination with different customer groups. For this purpose, the New Group
would be able to build on the expertise of existing customer consultation
structures and procedures in both markets.
Market Data & Analytics
Deutsche Borse intends that the New Group would continue to provide price
information for each cash market separately. Combined data packages would,
however, also be made available to the New Group's customers. All data offerings
of the New Group would continue to be sold and delivered directly as well as
through a global network of data vendors.
For back-office data, Deutsche Borse intends that existing delivery systems
would continue, but with the data on all instruments available to the New Group.
For users of pull services, including historical data and market statistics, the
Executive Board proposes that the New Group offer clients a unified interface to
both currently existing data warehouses and web-shops.
8 Customer Cost Reductions
If the proposed transaction takes place, Deutsche Borse intends to offer
customers of the London Stock Exchange immediate cost reductions by reducing the
cost of current tariff structures for electronic order book trading in the UK by
10% overall as of 1 January 2006. Prices would be capped at the new levels for
at least five years and would be expected to be further reduced in the future.
Moreover, Deutsche Borse would guarantee that these fees will never exceed
current levels.
In the area of information services, the New Group would offer a 10% price
reduction to customers who subscribed to a combined UK and German data package.
With respect to clearing, Deutsche Borse would put in place an alternative offer
to the London market to provide LCH's clearing guarantee at a price 50% lower
than the price currently charged by LCH.Clearnet.
9 Governance and Regulation
The London Stock Exchange would continue to be governed by its own board of
directors and to be regulated by the FSA. The duties of the directors will
remain unchanged and the London Stock Exchange and its Board would continue to
be located in London. Key board committees would remain in place.
Deutsche Borse is determined to ensure that customers would represent a
significant proportion of the Board of the London Stock Exchange as well as
having the appropriate number of directors who are genuinely independent of both
the exchanges and their customers. In addition, the Executive Board of Deutsche
Borse intends that the Board of the London Stock Exchange would be chaired by an
independent chairman.
If the proposed transaction takes place, Deutsche Borse commits that any
operational changes to the London market that have a material impact on the
economics of customers' operations in the London cash equity market would be
subject to a formal approval process. Any such proposed changes would be
initiated by the management of the London Stock Exchange and would require
approval by the Board of the London Stock Exchange. The Board of the London
Stock Exchange would be free to conduct a customer consultation process as it
saw fit. Should the Board of the London Stock Exchange approve any such
proposal, the proposal would then require additional approvals by both Deutsche
Borse's Executive Board and Supervisory Board. In elevating such matters to the
Supervisory Board, the Executive Board of Deutsche Borse would amend its rules
of procedure and add another layer of customer-oriented governance to the
decision process on such matters.
The Supervisory Board of Deutsche Borse currently comprises of fourteen
shareholder-elected representatives and seven worker-elected representatives.
Deutsche Borse's Supervisory Board members serve a three year term. All current
service terms for Supervisory Board members expire at the shareholders' annual
general meeting in the Spring of 2006. Deutsche Borse would commit, as an
integral part of the Offer, if it takes place, that new candidates will be
nominated such that seven of the fourteen shareholders' representatives will
have close ties to the City of London. The Executive Board believes that by
adding significant customer representation to the Board of the London Stock
Exchange, and the Supervisory Board of Deutsche Borse, it would create a
substantially improved level of customer governance over the London Stock
Exchange.
Deutsche Borse intends that the members of the Executive Board responsible for
the Cash Equities, Derivatives and Clearing businesses are resident in London.
These activities would represent approximately 45% of the New Group's pro forma
revenues for the financial year 2003.
The operating model of the New Group would be based on two cash market
exchanges, one in London and one in Frankfurt, each operating under its
respective legal and regulatory environment. The FSA would remain the sole
regulator of the London Stock Exchange while the German Exchange Supervisory
Authorities would remain the sole regulator of the Frankfurt Stock Exchange.
Deutsche Borse has experience of operating different markets with different
regulators. For example, Eurex is regulated in Switzerland, the US and Germany.
Deutsche Borse's ownership interest in Eurex has no impact on the regulatory
regimes, just as its role as technology provider to the markets in Dublin and
Vienna has no impact on the regulations in those markets.
Issuers would continue to be expected to comply with regulatory standards as
they exist in their respective markets today.
10 Impact On The Frankfurt Market
Listing and trading activities as well as regulation in the Frankfurt market
would be entirely unaffected by the proposed transaction and would remain
unchanged. Deutsche Borse would continue to be incorporated in Germany with its
global headquarters in Frankfurt
11 Capitalising On Business Opportunities For The New Group
Industries with a relatively high element of fixed costs and thus low marginal
costs can realise economies of scale by rationalising production facilities,
thus lowering the fixed costs for the industry as a whole to the benefit of
shareholders and customers. This economic rationale applies to the exchange
industry, more than in most other industries. The economic benefits of
consolidation are clearly visible in the European derivatives markets with
Eurex, the successful Swiss/German joint venture of Deutsche Borse's DTB and
SWX's Soffex, having achieved significant economies of scale through its fully
electronic market platforms.
The Executive Board estimates that a combination with the London Stock Exchange
would lead to an additional contribution to profit before tax from revenue and
cost synergies of at least €100 million per annum which is expected to be
achieved in the third financial year (2008) following completion of the
transaction. Of this €100 million, approximately €25 million per annum is
estimated to come from revenue synergies and approximately €75 million per annum
from reduced costs. Total restructuring costs are expected to be less than €100
million.
The Executive Board of Deutsche Borse estimates that the combination would lead
to accretion in its earnings per share (before implementation costs) in the
first full financial year after completion of the transaction. In addition, the
pro forma return on investment in the first full financial year after completion
of the transaction, including full run rate synergies, is expected to be
approximately 8%, which exceeds the Group's anticipated cost of capital.
The Executive Board also believes that the strong cash flow generation of the
New Group would facilitate the continuation of the progressive dividend policy
of Deutsche Borse, maintaining a strong AA credit rating and facilitate the
implementation of a share buyback program by the end of 2006.
Cost Synergies
The transaction with the London Stock Exchange offers significant potential for
cost synergies, as follows:
• operating the London and Frankfurt cash markets on a single next
generation trading platform;
• reducing systems development expenditure by eliminating the need for
regular updates on two separate systems; and
• eliminating support, administration, marketing and management
information functions overlap;
The Executive Board believes cost synergies would reach a run rate of at least
€75 million per annum in the third full financial year following completion of
the transaction. Approximately two thirds of the anticipated synergies are
information technology and systems related. Cash market operations and
development account for the bulk of savings in information technology with
expected synergies of at least €50 million per annum on a run rate basis.
Additional cost synergies including headcount and budget reductions from
consolidating overlapping functions are expected to total at least €25 million
per annum on a run rate basis. These numbers are based on Deutsche Borse's
analysis, before due diligence has been undertaken, which may show potential for
further synergies.
Revenue Synergies
The Executive Board expects the New Group to be able to expand the range of
products and services offered by leveraging its expanded markets expertise and
product innovation skills in international cash and derivatives markets. In
addition, cross-selling opportunities across the shared portfolio of businesses
are expected to arise by combining the customer networks of Deutsche Borse and
the London Stock Exchange. Resultant revenue synergies accruing from the
proposed transaction are expected to reach at least €25 million per annum on a
run rate basis in the third full financial year following completion of the
transaction.
The UK market for equity options is widely regarded as underdeveloped compared
to other major financial markets. The ratio of UK equity derivatives turnover to
cash equity trades in 2003 was one fifth that of the German market in the same
year. The Executive Board believes that enhanced competition in the UK equity
options market can unlock some of its growth potential. Deutsche Borse proposes
that the New Group launch a UK equity derivatives alternative to Eurex
customers. Eurex is in a favourable position to leverage its existing technology
investments to create new trading products, enhance liquidity, lower operating
costs for customers, and increase customer choice.
The transaction would link London, as a major international financial centre
strongly positioned in international equity trading, with the large capital
market potential of Germany, the world's third largest economy and its largest
export nation. Germany has a large pool of small and medium sized companies
which may ultimately access the equity markets to fund future growth, resolve
ownership/succession issues and replace current debt/equity ratios. German
investors also have lower exposure to equities compared to other European
investors, representing significant untapped opportunities in equity market
trading. Furthermore the possibility of establishing an equivalent to the
successful AIM market in Germany would be explored.
The New Group would also be a leading global player in the production,
refinement and distribution of market data and analytics. In a world of
quantitative and algorithmic technical analyses, quoting must be quick and
precise and trading participants are constantly seeking higher quality input
data with minimum delay. As the source of market data, exchanges can deliver
unique data depth with minimum delay. The New Group would be in a position to
create a new level of depth for a much larger data pool, covering equity markets
with the highest trading volume in Europe and the world's leading derivatives
exchange. The combination would also create critical mass for direct data feed
services with minimum delay, as customers would only require a single connection
for a large portion of the required input data to their trading systems.
Critical mass would also be achieved for users of reference data. An integrated
stream of primary data on all instruments of the New Group will become a strong
alternative to existing partial vendor feeds to back-office users.
The Executive Board believes that the New Group would be the most significant
platform for dealing in Exchange Traded Funds (ETFs) and structured products in
Europe and expects it to participate in the growth opportunities these markets
offer. ETFs in Europe are expected to continue above average growth in terms of
both assets under management and new product offerings. The market for
certificates and warrants, where Germany is the largest market in Europe with
more than 50,000 traded products, continues to expand rapidly across the
Continent. By enhancing functionality and service in trading, clearing,
securities lending and settlement, the aim of Deutsche Borse is to expand the
value chain offered to the market.
12 A Vision For Further Growth and Innovation
The Executive Board of Deutsche Borse has the following vision for growth and
innovation.
A review of the securities markets over the past ten years reveals that change
has been driven both by investors and exchanges. While customers were developing
new trading patterns, cash and derivatives markets have been converging across
all asset classes and exchanges were at the forefront of developing electronic
execution. However, exchanges have been slow to mirror their customers' trading
patterns, leaving significant growth opportunities untapped. The Executive Board
believes that Deutsche Borse is the first exchange organisation positioned to do
so, given its multi-product, multi-function and multi-market business model, not
only in Europe but also globally.
Hedge funds represent examples of drivers for innovation. As today's most active
traders, they are fuelling the demand for convergence between cash and
derivatives instruments, as well as between fixed income and equity products.
They are the source of a constant stream of new synthetic instruments. In a
number of investment banks, derivatives and cash sales desks are being combined
together. Fixed income and equities departments are being merged. Resources are
being allocated to create and trade synthetic instruments. The focus is on
trading and investment opportunities rather than on any traditional fixed income
/equity delineation. Any successful provider of securities services must master
the new skills accordingly. It must have a presence in the most important
markets, both in terms of products and geography; it must have the ability to
stay at the forefront of information technology trends and set technological
standards; it must demonstrate operational excellence as well as market and
product development capabilities; and, it must have operational experience along
the entire securities processing chain and the financial capability to invest
and expand.
In the recent past, Deutsche Borse and Eurex have been at the forefront of
process innovation - introducing electronic trading of derivatives and equities,
building straight-through processing capabilities and facilitating remote
access. London, on the other hand, is where many important product innovations -
such as the introduction of credit derivatives - occurred. Combining these two
proven capabilities will create the world's most dynamic environment for
financial innovation. New product ideas can quickly become exchange traded,
instead of boosting OTC trading. This should improve risk management, lower
collateral requirements and broaden the range of available products for
intermediaries and customers.
The Executive Board believes that a combination of the London Stock Exchange and
Deutsche Borse can deliver all these requirements. New trading strategies such
as statistical arbitrage trading can be extended to more order-books and
products. New business models for the role of intermediation are expected to
evolve, thus giving customers of intermediaries more choice. In addition, access
and use of the combined trading platform will be markedly cheaper, due to
rationalisation benefits and the fact that Deutsche Borse is determined that the
New Group will pass on part of the synergy benefits to its customers. The next
generation platform would reflect better the customers' evolving business
requirements (e.g. at a technical level combining the trading of equity cash
market instruments with their corresponding equity derivatives, enabling them to
trade more cheaply and execute far more advanced trading strategies). Customers
are expected to benefit from the establishment of a world class UK equity
derivatives market which does not currently exist. Finally, customers will be
part of a consultation and governance process that goes far beyond the London
Stock Exchange's existing model.
The combination also supports the improved efficiency of the European capital
markets and other markets such as the US and Asia/Pacific where the New Group is
and would be active. Inefficiencies in the European equity markets are rooted in
national fragmentation. There are too many exchanges, most of them working with
sub-optimal economies of scale and scope. These inefficiencies have been
overcome in the derivatives markets, in clearing and in the settlement and
custody of bonds. The cash markets, however, are national markets. Only by
creating the technical equity markets platform of choice in Europe that support
both the UK and the German markets, through the combination of the London Stock
Exchange and Deutsche Borse can the largest possible step be made to overcome
such fragmentation. Liquidity would be expected correspondingly to increase in
each market; implicit and explicit costs of trading would go down; costs of
access would be reduced; and the number of participants would rise. This will
result in higher total returns for investors, lower costs of capital, reduced
reliance on the US markets for issuers and expanded business opportunities for
intermediaries. More companies will seek a listing on this platform of choice to
participate in a more attractive external financing of their growth, and
innovation will increase, resulting in new products and service offerings.
Through the combination of an expanded equity market and the New Group's
derivative offerings, new and more attractive forms of risk management can be
delivered to customers.
As Europe's largest and financially strongest exchange organisation, the New
Group is expected to become the major US and Asian operators in both the cash
equities and derivatives markets. Such partnerships would open up further growth
opportunities and expand the role of the London Stock Exchange and the City of
London as the favoured listing platform for overseas companies. All of these
factors should lead to significant growth opportunities for the New Group.
The largest customers of exchanges, clearing houses and settlement/custody
organisations have already designed global structures for their business. To
serve their customers well, the providers of infrastructure services have no
choice but to become global in their structure and offerings as well. This
represents an attractive business opportunity and first mover advantage for the
combination of London Stock Exchange and Deutsche Borse. The New Group would
enable the London Stock Exchange to provide a three-way offering encompassing
the three major trading regions and corresponding time zones of the US and Asia
in addition to the home market in Europe. The New Group would be better equipped
than any other competitor to build such a three-way offering over time. A strong
home base in Europe, a physical presence in London, Frankfurt, Berlin, Paris,
Luxembourg and Madrid, a number one position in European equities and
derivatives, and number two positions in clearing and settlement/custody, would
ensure that the pre-requisites for global expansion are in place.
13 Benefits for Stakeholders
The Executive Board expects the combination of the London and Frankfurt cash
markets and membership networks to provide shareholders, investors, issuers and
intermediaries, as well as the financial centres involved, with enhanced access
to both the UK and German markets. This access in combination with the proposed
tariff reductions for UK electronic trading is expected to have a positive
impact on trading volumes, spreads, market depth, all-in total transaction costs
(including implicit transaction costs, spreads and market impact costs) and the
cost of capital, to the benefit of customers, shareholders and other
stakeholders.
Given the envisaged customer oriented membership of the Supervisory Board and
the significant UK representation on all Boards, the Executive Board believes
the New Group would offer customers greater influence over corporate decisions
than they currently experience in the London market.
Shareholders
The proposed transaction is expected to lead to significant synergies as set out
above under 'Synergies'. It also provides an opportunity for current and future
shareholders of Deutsche Borse to benefit from a well-balanced and diversified
business portfolio with enhanced global reach. While the London Stock Exchange
has shown operational strength in the cash business, not least due to London's
excellent position as a global financial centre, Deutsche Borse has achieved
higher growth rates through its strong position in growth markets such as
derivatives. The Executive Board believes that the New Group would be well
positioned to participate in future growth in the global securities industry and
would serve a diversified international customer base.
Customers
Certain intermediaries, wholesale and retail brokers, cash and derivatives
specialists as well as data users should directly benefit from the proposed
price reductions. Today, firms active in trading cash equities and derivatives
continue to operate in both the UK and German markets as well as in several
other European markets, requiring separate memberships in trading, clearing, and
settlement. With the proposed introduction of a single next generation trading
platform for the UK and German cash equity market, these market participants
would benefit from infrastructure rationalisation as the need to support two IT
release cycles for future system upgrades would be eliminated.
The Executive Board expects that a closer alignment of the UK and European cash
and derivatives markets is expected to lead to further benefits such as
facilitated execution of complex trading strategies. The Executive Board expects
that the transaction would lead to the introduction of new UK index products and
equity derivatives, as well as further opportunities to expand the product scope
and geographical reach of Eurex. Furthermore, Deutsche Borse intends to extend
the London Stock Exchange's EDX joint venture in conjunction with Eurex. This
would lead to additional revenue opportunities for market participants as the
New Group would be able to take an active role in the development of these
products and markets.
Information vendors should benefit from the increased product range and the
anticipated increase in demand for the combined real-time data packages due to
the international scope of both markets as well as through standardisation of
delivery formats.
Issuers and Investors
UK and German issuers would continue to be able to be listed in their local
market but are expected to benefit from greater investment demand and enhanced
visibility due to facilitated access for investors and intermediaries. It is
expected that the increase in trading activity and liquidity would result in
improved equity financing opportunities and ultimately in a decrease in the cost
of capital for issuers. The Executive Board expects that local market
environments would continue to be important, especially for smaller companies
who would initially tap their home market for capital and who usually have a
more domestic shareholder base. Clearly defined market segments are intended to
offer small and medium-sized companies exposure to greater investment demand
from the combined network of international market participants. The possibility
of establishing an equivalent of the successful AIM market in Germany would be
explored.
As a positive result of the reduced transactions costs, portfolio
diversification effects for investors are expected to facilitate a shift from a
purely domestic to a more pan-European investment focus. Analysis of stock
holdings in both countries conducted by Deutsche Borse revealed that a large
number of direct and indirect equity holdings are still invested in domestic
assets. In addition, the close alignment of cash and derivatives markets is
expected to facilitate the execution of complex trading strategies.
Financial Centres
The Executive Board is convinced that both financial centres, London and
Frankfurt, would benefit from the combination of the London Stock Exchange and
Deutsche Borse. Although location is less relevant in today's widely electronic
trading environment, the Executive Board believes that the maintenance and
creation of domestic and international networks of market participants is in the
best interest of exchanges to anticipate evolving client needs and foster
product innovation. By realising significant synergies, the proposed transaction
would enable both organisations to further strengthen their competitive
positions and therefore ensure long-term security for the role of the financial
centres.
London would gain because the New Group should be able to ensure that its
infrastructure is continuously at the cutting edge. For all its strengths, the
failure of SEAQ to keep liquid trading in continental European shares, the late
introduction of electronic trading and the Taurus debacle highlight that
infrastructure is the City's potential weakness. Building on the experience of
the London Stock Exchange and the record of innovation and reliability of
Deutsche Borse, this potential shortcoming will become a source of strength.
Frankfurt, on the other hand, would gain because the New Group would be able to
offer access to an international liquidity network and range of assets that
would be second to none. In addition, a highly efficient equities market with
easy access to international investors may facilitate the listing of Germany's
numerous 'Mittelstand' firms. This would provide an important source of top-line
growth for the New Group. It would also ensure that significant numbers of legal
advisers, IPO specialists and consultants would continue to serve their
customers from Frankfurt. Just as the US securities markets have thrived on the
dual structure of the industry - with Chicago focusing on derivatives and New
York on bonds and equities - Europe's capital market is large and promising
enough to support two major financial centres.
Enquiries
Deutsche Borse Tel: +49 69 211 11500
Walter Allwicher
Candice Adam
Frank Hartmann
Goldman Sachs International
(Financial Adviser and Corporate Broker to Deutsche
Borse)
Wayne Moore Tel: +49 69 7532 1000
Wolfgang Fink
Chris Williams Tel: +44 20 7774 1000
Basil Geoghegan
The Maitland Consultancy Tel: +44 20 7379 5151
(PR Adviser to Deutsche Borse)
Angus Maitland
Colin Browne
Goldman Sachs International is acting exclusively for Deutsche Borse Group in
connection with the Offer and no one else and will not be responsible to anyone
other than Deutsche Borse Group for providing the protections afforded to
clients of Goldman Sachs International nor for providing advice in relation to
the Offer or in relation to the content of this announcement or any transaction
referred to herein.
Deutsche Borse Group may purchase London Stock Exchange Shares otherwise than
under the Offer, such as in open market or privately negotiated purchases. Such
purchases may be made either directly or through a broker and such purchases
shall comply with the applicable laws of the United Kingdom as well as the rules
of the London Stock Exchange and the UK Takeover Code. Deutsche Borse Group
shall disclose in the United Kingdom, the United States and Germany by means of
a press release such purchases of London Stock Exchange Shares outside the Offer
as required by applicable UK law as well as the rules of the London Stock
Exchange and the UK Takeover Code.
The Offer in the United States, if made, is expected to be made solely by
Deutsche Borse Group pursuant to an exemption from the US tender offer rules
provided by rule 14d-1(c) under the US Securities Exchange Act 1934, as amended.
Neither Goldman Sachs International nor any of its respective affiliates will
make the Offer in the United States.
This announcement does not constitute an offer or an invitation to purchase any
securities. The availability of the Offer and the Loan Note Alternative to
persons outside the United Kingdom may be affected by the laws of the relevant
jurisdictions. Persons not resident in the United Kingdom, or who are subject to
the laws of any other jurisdiction, should inform themselves about and observe
any applicable requirements. Further information in relation to overseas
shareholders will be contained in the formal Offer Document.
Unless otherwise determined by Deutsche Borse Group, the Offer, if made, will
not be made, directly or indirectly, in or into, or by the use of mails of, or
by any means or instrumentality (including, without limitation, telephonically
or electronically) of interstate or foreign commerce of, or any facilities of a
national securities exchange of, Canada, Australia or Japan or any other
jurisdiction if to do so would constitute a violation of the relevant laws of
such jurisdiction and the Offer will not be capable of acceptance by any such
use, means, instrumentality or facilities or from or within Canada, Australia or
Japan or any such other jurisdiction. Accordingly, neither this announcement nor
the formal Offer Document nor any related documents are being, and must not be,
directly or indirectly, mailed or otherwise forwarded, distributed or sent in or
into or from Canada, Australia or Japan or any such other jurisdiction. Any
person (including, without limitation, any nominee, trustee or custodian) who
would, or otherwise intends to, or who may have a contractual or legal
obligation to, forward this announcement, the formal Offer Document and/or any
related document to any jurisdiction outside the United Kingdom should refrain
from doing so and should seek appropriate professional advice before taking any
action.
The Loan Notes have not been, and, if issued, will not be, registered under the
United States Securities Act of 1933 (as amended) or under any relevant
securities laws of any state or other jurisdiction of the United States; nor
have the relevant clearances been, nor will they be, obtained from the
securities commission of any province or territory of Canada; nor has any
prospectus been lodged with, or registered by, the Australian Securities and
Investments Commission nor have any steps been taken, nor will any steps be
taken, to enable the Loan Notes to be offered in compliance with applicable
securities laws of Japan. Accordingly, the Loan Notes, if issued, may not be
offered, sold, resold or delivered, directly or indirectly, in or into the
United States, Canada, Australia or Japan or any other jurisdiction if to do so
would constitute a violation of the relevant laws in such jurisdiction or
require registration thereof, or to, or for the account or benefit of, any US
Person or resident of Canada, Australia or Japan.
Appendix I:
Further Details of the Offer
1. The Offer
The making of the Offer is subject to the satisfaction or waiver of the
Pre-condition. The Offer, which will be subject to the further terms and
conditions set out in this Appendix I and Appendix II and to be set out in the
formal Offer Document and (in respect of London Stock Exchange Shares in
uncertificated form) the accompanying Form of Acceptance, when issued, will (if
made) be made on the following basis:
For each London Stock Exchange Share 530 pence in cash
It is also currently expected that the Offer will also include a Loan Note
Alternative. The Offer values the whole of the London Stock Exchange's issued
and to be issued share capital at approximately £1.4 billion. If made, the Offer
will be made by a wholly owned subsidiary of Deutsche Borse, incorporated in the
UK, Deutsche Borse (UK 2) plc, a subsidiary of Deutsche Borse (UK 1) Limited,
another wholly owned subsidiary of Deutsche Borse.
The London Stock Exchange Shares will be acquired by Deutsche Borse Group under
the Offer with full title guarantee fully paid and free from all liens, charges,
equities, encumbrances, rights of pre-emption and any other rights of any nature
whatsoever and together with all rights now or hereafter attaching to them,
including the right to receive in full dividends and other distributions, if
any, declared, made or paid after the date of this announcement.
2. Loan Note Alternative
It is currently expected that the London Stock Exchange Shareholders (other than
certain overseas shareholders) accepting the Offer will be entitled to elect to
receive Loan Notes to be issued by Deutsche Boerse (UK 2) plc, the Deutsche
Borse Group company making the Offer, instead of some or all of the cash
consideration which would otherwise be receivable under the Offer on the
following basis and on the further terms and conditions set out in this Appendix
and Appendix II.
For every £1 of cash consideration £1 of Loan Notes
If issued, the Loan Notes will be issued, credited as fully paid, in amounts and
integral multiples of £1 in nominal value. Fractional entitlements to Loan Notes
will be disregarded. The Loan Notes will bear interest from the date of issue to
the relevant holder of the Loan Notes at a rate of 1%. per annum below LIBOR for
six month sterling deposits determined on the first business day of the relevant
interest period. Interest will be payable (less any tax required by law to be
deducted therefrom) semi-annually in arrears. The first interest payment date
will be 1 December 2005 in respect of the period from and including the date(s)
of issue of Loan Notes to relevant holder(s) up to (but excluding) 1 December
2005. The Loan Notes will be transferable (subject to certain conditions) and
will constitute unsecured obligations of Deutsche Boerse (UK 2) plc. No
application will be made for the Loan Notes to be listed or dealt in on any
stock exchange. The Loan Notes will be redeemable at par at the holder's option,
in whole or in part (being £100 in nominal amount or any integral multiple
thereof), on any interest payment date on or following the date falling six
months following the date of issue of the relevant Loan Notes. If at any time
less than 25% in nominal value of the total amount of Loan Notes issued prior to
that time remain outstanding, Deutsche Boerse (UK 2) plc shall have the right to
repay all (but not some) of the outstanding Loan Notes at par together with
accrued but unpaid interest. Any Loan Notes outstanding on the fifth anniversary
of issue will be redeemed in full at par (together with accrued but unpaid
interest). London Stock Exchange Shareholders electing for the Loan Note
Alternative will be obliged to elect for a minimum of £5,000 in nominal amount
of Loan Notes.
If valid elections for the Loan Note Alternative do not require the issue of
Loan Notes exceeding £25 million in nominal value of Loan Notes, no Loan Notes
will be issued unless Deutsche Borse Group determines otherwise, and holders of
London Stock Exchange Shares who have elected for the Loan Note Alternative will
receive cash in accordance with the basic terms of the Offer.
The Loan Note Alternative will be conditional upon the Offer becoming or being
declared unconditional in all respects and will remain open for so long as the
Offer remains open for acceptance. Full details of the Loan Note Alternative
will be set out in the formal Offer Document.
3. Holdings in the London Stock Exchange
Neither Deutsche Borse Group nor any member of the Executive Board or
Supervisory Board of Deutsche Borse, nor, so far as Deutsche Borse is aware, any
party acting in concert with Deutsche Borse, owns or controls any London Stock
Exchange Shares or holds any options to purchase the London Stock Exchange
Shares or holds any derivatives referenced to the London Stock Exchange Shares.
4. Compulsory Acquisition and Cancellation of Listing
If Deutsche Borse Group receives acceptances under the Offer in respect of, and/
or otherwise acquires, 90% or more of the London Stock Exchange Shares to which
the Offer relates, Deutsche Borse Group intends to exercise its rights pursuant
to the provisions of section 428 to 430F of the UK Companies Act to acquire
compulsorily the remaining London Stock Exchange Shares. As soon as it is
appropriate and possible to do so, subject to the Offer becoming or being
declared unconditional in all respects, Deutsche Borse Group intends to procure
the making of an application by the London Stock Exchange for the cancellation
of the listing of the London Stock Exchange Shares on the Official List and for
the cancellation of admission to trading of the London Stock Exchange Shares on
the London Stock Exchange's market for listed securities. It is anticipated that
the cancellation of listing and trading will take effect no earlier than 20
business days after the Offer becomes or is declared unconditional in all
respects. De-listing will significantly reduce the liquidity of any London Stock
Exchange Shares not assented to the Offer.
5. Regulatory Matters
The acquisition of the London Stock Exchange by Deutsche Borse Group requires
the approval of competition authorities in the United Kingdom and Germany.
Merger control clearance is expected to be received within the UK Takeover
Code's timetable.
6. Overseas Shareholders
The availability of the Offer to persons who are not resident in the United
Kingdom or in the United States may be affected by the laws of their relevant
jurisdiction. Such persons should inform themselves of, and observe, any
applicable legal or regulatory requirements of their jurisdiction. Further
details in relation to overseas shareholders will be contained in the formal
Offer Document.
7. Employment
The existing employment rights, including pension rights, of the employees of
the London Stock Exchange, would be fully safeguarded if the Offer is made and
the transaction completes.
8. London Stock Exchange Share Option Schemes
If made, the Offer will extend to all existing issued London Stock Exchange
Shares and to any London Stock Exchange Shares which are transferred or sold
from treasury or unconditionally allotted or issued prior to the date on which
the Offer closes (or such earlier date as Deutsche Borse Group may, subject to
the UK Takeover Code, decide) including the London Stock Exchange Shares
transferred from treasury or issued pursuant to the exercise of options or
awards under the London Stock Exchange Share Option Schemes or otherwise.
Appropriate proposals will be made to holders of options under the London Stock
Exchange Share Option Schemes as soon as practicable after the Offer is made.
APPENDIX II
1. Conditions and certain further terms of the Offer
It is currently intended that the Offer will be made in the US by Deutsche Borse
Group but Deutsche Borse Group reserves the right to adjust the treatment of US
shareholders in the event of receiving further information on due diligence. The
Offer, if made, will comply with the applicable rules and regulations of the UK
Listing Authority, the London Stock Exchange and the UK Takeover Code, will be
governed by English law and will be subject to the jurisdiction of the courts of
England. In addition, it will be subject to the terms and conditions set out in
the Offer Document and (in respect of the London Stock Exchange Shares in
uncertificated form) the related Form of Acceptance.
The Offer, if made, will be made by a wholly owned subsidiary of Deutsche Borse,
incorporated in the UK, Deutsche Borse (UK 2) plc, a subsidiary of Deutsche
Borse (UK 1) Limited, another wholly owned subsidiary of Deutsche Borse.
2. Conditions of the Offer
The Offer will be subject to the following conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn) by
not later than 3.00 p.m. (London time) on the first closing date of the Offer
(or such later time(s) and/or date(s) as Deutsche Borse Group may, subject to
the rules of the UK Takeover Code, decide) in respect of not less than 90% (or
such lesser percentage as Deutsche Borse Group may decide) of the nominal value
of the London Stock Exchange Shares to which the Offer relates, provided that,
this condition will not be satisfied unless Deutsche Borse and/or its
wholly-owned subsidiaries shall have acquired or agreed to acquire (pursuant to
the Offer or otherwise), directly or indirectly, London Stock Exchange Shares
carrying, in aggregate, more than 50% of the voting rights then normally
exercisable at general meetings of the London Stock Exchange (including for this
purpose, except to the extent (if any) otherwise required by the Panel, any
voting rights attaching to any shares which are unconditionally allotted or
issued before the Offer becomes or is declared unconditional as to acceptances,
whether pursuant to the exercise of conversion or subscription rights or
otherwise); and for this purpose (i) the expression 'London Stock Exchange
Shares to which the Offer relates' shall be construed in accordance with
sections 428-430F of the UK Companies Act; and (ii) shares which have been
unconditionally allotted shall be deemed to carry the voting rights which they
will carry on issue; and
(b) either the conditions at (i) and (ii) being met, or the
condition at (iii) being met:
(i) the Office of Fair Trading indicating in terms satisfactory
to Deutsche Borse Group that it does not intend to refer the proposed
acquisition of the London Stock Exchange by Deutsche Borse Group (the 'Proposed
Acquisition') to the Competition Commission;
(ii) one of the following:
(A) Deutsche Borse Group having received written confirmation from
the German Federal Cartel Office (Bundeskartellamt) that the Proposed
Acquisition does not constitute a concentration requiring to be notified to the
Bundeskartellamt;
(B) Deutsche Borse Group having received written confirmation from
the Bundeskartellamt that the Proposed Acquisition does not meet the
requirements for prohibition pursuant to section 36 paragraph 1 of the Act
against Restraints on Competition (GWB) and that the proposed merger may be
consummated;
(C) if the Proposed Acquisition has been approved by the
Bundeskartellamt subject to conditions (Bedingungen), Deutsche Borse Group
having received written confirmation from the Bundeskartellamt that the
Bundeskartellamt considers those conditions as being fulfilled;
(D) if the Proposed Acquisition has been approved by the
Bundeskartellamt subject to obligations (Auflagen), the obligations being
reasonably satisfactory to Deutsche Borse Group;
(E) the one-month period from receipt of the complete notification
by the Bundeskartellamt pursuant to section 40 paragraph 1 GWB having expired
without Deutsche Borse Group having been notified by the Bundeskartellamt that
it has initiated an examination of the Proposed Acquisition;
(F) the four-month period from receipt of the complete notification
by the Bundeskartellamt having expired without the Bundeskartellamt having
issued an order prohibiting the Proposed Acquisition pursuant to section 40
paragraph 2 sentences 1-3 GWB; or
(G) a prohibition to complete the merger pursuant to section 41
paragraph 1 GWB having ceased to exist;
(iii) in the event that the European Commission obtains jurisdiction
in relation to the Proposed Acquisition as a result of the application of the
provisions of either Article 4(5) or Article 22(3) of Council Regulation (EC)
139/2004 (the 'Regulation'), it being established, in terms satisfactory to
Deutsche Borse Group, that it is not the intention of the European Commission
either to initiate proceedings under Article 6(1)(c) of the Regulation or to
make a referral to a competent authority of the United Kingdom and/or Germany
and/or another member state of the European Union or EFTA under article 9(1) of
the Regulation in respect of the Proposed Acquisition or any matters arising
therefrom PROVIDED THAT if a decision of the European Commission under Article
22(3) of the Regulation does not constitute an acceptance of a request from the
United Kingdom, then (i) above shall continue to apply, and PROVIDED FURTHER
THAT if a decision of the European Commission under Article 22(3) of the
Regulation does not constitute an acceptance of a request from Germany, then
(ii) above shall continue to apply;
(c) the obtaining in form and substance satisfactory to Deutsche Borse Group of
all such other consents or clearances (including deemed consents and clearances)
as are required, or reasonably considered to be appropriate by Deutsche Borse
Group, in respect of the Proposed Acquisition or any matters arising therefrom,
under any merger control rules of any state or jurisdiction;
(d) no central bank, no government or governmental, quasi-governmental,
supranational, statutory or regulatory body, or any court, institution,
investigative body, association, trade agency or professional or environmental
body or (without prejudice to the generality of the foregoing) any other person
or body in any jurisdiction (each, a 'Relevant Authority') having decided to
take, institute, implement or threaten any action, proceedings, suit,
investigation or enquiry or having required any action to be taken or otherwise
having done anything or enacted, made or proposed any statute, regulation,
decision or order or change to published practice or otherwise taken any other
step or done any thing, including the grant of any injunction, and there not
being outstanding any statute, regulation, legislation or order, and no
shareholder having decided to take, instituted, implemented, or threatened any
action, proceeding or suit against any member of Deutsche Borse Group, the
members of its Management Board, or of its Supervisory Board, or any such member
or members, that would or might:
(i) restrict, restrain, prohibit, delay, impose additional
conditions or obligations with respect to, or otherwise interfere with the
implementation of, the Offer or the acquisition of any London Stock Exchange
Shares by Deutsche Borse Group or any matters arising therefrom;
(ii) result in a material delay in the ability of Deutsche Borse Group, or
render Deutsche Borse Group unable, to acquire some or all of the London Stock
Exchange Shares;
(iii) require, prevent, delay or affect the divestiture by Deutsche Borse or any
of its subsidiaries, subsidiary undertakings or associated undertakings
(including any company of which 20% or more of the voting capital is held by the
Deutsche Borse Group or any partnership, joint venture, firm or company in which
any of them may be interested) (together the 'wider Deutsche Borse Group') or
the London Stock Exchange or any of its subsidiaries, subsidiary undertakings or
associated undertakings (including any company of which 20% or more of the
voting capital is held by the London Stock Exchange Group or any partnership,
joint venture, firm or company in which any of them may be interested) (together
the 'wider London Stock Exchange Group') of all or any portion of their
businesses, assets or property or of any London Stock Exchange Shares or other
securities in the London Stock Exchange or impose any limitation on the ability
of any of them to conduct their respective businesses or own their respective
assets or properties or any part thereof;
(iv) impose any limitation on the ability of any member of the wider Deutsche
Borse Group to acquire or hold or exercise effectively, directly or indirectly,
all rights of all or any of the London Stock Exchange Shares (whether acquired
pursuant to the Offer or otherwise);
(v) require any member of the wider Deutsche Borse Group or the wider London
Stock Exchange Group to acquire or offer to acquire any shares or other
securities or rights thereover in any member of the wider London Stock Exchange
Group owned by any third party;
(vi) make the Offer or its implementation or the proposed acquisition of the
London Stock Exchange or any member of the wider London Stock Exchange Group or
of any London Stock Exchange Shares or any other shares or securities in, or
control of, London Stock Exchange, illegal, void or unenforceable in or under
the laws of any jurisdiction or otherwise, directly or indirectly, restrain,
prohibit, restrict or materially delay the same or impose additional conditions
or obligations with respect thereto, or otherwise challenge or interfere
therewith;
(vii) impose any limitation on the ability of any member of the wider Deutsche
Borse Group or the wider London Stock Exchange Group to integrate or co-ordinate
all or any part of its business, with all or any part of the business of any
other member of the wider Deutsche Borse Group or the wider London Stock
Exchange Group;
(viii) result in any member of the wider Deutsche Borse Group or the wider
London Stock Exchange Group ceasing to be able to carry on business under any
name which it presently does so; or
(ix) otherwise adversely affect any or all of the businesses, assets, prospects
or profits of any member of the wider Deutsche Borse Group or the wider London
Stock Exchange Group or the exercise of rights of shares of any company in the
London Stock Exchange Group,
and all applicable waiting periods and other time period during which such
Relevant Authority could institute, implement or threaten any such action,
proceeding, suit, investigation, enquiry or reference or otherwise intervene
having expired, lapsed or been terminated;
(e) all authorisations, orders, grants, consents, clearances, licences,
permissions and approvals, in any jurisdiction, deemed necessary or appropriate
by Deutsche Borse Group for or in respect of the Offer, the proposed acquisition
of any shares or securities in, or control of, the London Stock Exchange or any
member of the wider London Stock Exchange Group by any member of the wider
Deutsche Borse Group or the carrying on of the business of any member of the
wider London Stock Exchange Group or the wider Deutsche Borse Group being
obtained in terms satisfactory to Deutsche Borse Group from all appropriate
Relevant Authorities or (without prejudice to the generality of the foregoing)
from any persons or bodies with whom any members of the wider London Stock
Exchange Group or the wider Deutsche Borse Group has entered into contractual
arrangements and such authorisations, orders, grants, consents, clearances,
licences, permissions and approvals remaining in full force and effect and there
being no intimation of any intention to revoke or not to renew the same and all
necessary filings having been made, all appropriate waiting and other time
periods (including extensions thereto) under any applicable legislation and
regulations in any jurisdiction having expired, lapsed or been terminated and
all necessary statutory or regulatory obligations in any jurisdiction in respect
of the Offer or the proposed acquisition of the London Stock Exchange by
Deutsche Borse Group or of any London Stock Exchange Shares or any matters
arising therefrom having been complied with;
(f) appropriate assurances being received, in terms satisfactory to Deutsche
Borse Group, from the relevant authorities or any party with whom any member of
the wider London Stock Exchange Group has any contractual or other relationship
that the interests held by any member of the wider London Stock Exchange Group
under licences, leases, consents, permits and other rights will not be adversely
amended or otherwise affected by the Offer or the proposed acquisition of the
London Stock Exchange or any matters arising therefrom, that such licences,
leases, consents, permits and other rights are in full force and effect and that
there is no intention to revoke or amend any of the same;
(g) there being no provision of any agreement, instrument, permit, licence or
other arrangement to which any member of the wider London Stock Exchange Group
is a party or by or to which it or any of its assets may be bound or subject
which, as a consequence of the Offer or the acquisition of the London Stock
Exchange or because of a change in the control or management of the London Stock
Exchange or any member of the wider London Stock Exchange Group or otherwise,
could or might have the result that:
(i) any moneys borrowed by, or other indebtedness, actual or contingent, of, or
grant available to, any member of the wider London Stock Exchange Group becomes
or is capable of being declared repayable immediately or earlier than the
repayment date stated in such agreement, instrument or other arrangement or the
ability of any member of the wider London Stock Exchange Group to borrow moneys
or incur indebtedness is withdrawn, inhibited or adversely affected;
(ii) any mortgage, charge or other security interest is created over the whole
or any part of the business, property or assets of any member of the wider
London Stock Exchange Group or any such security (whenever arising) becomes
enforceable;
(iii) any such agreement, instrument, permit, licence or other arrangement, or
any right, interest, liability or obligation of any member of the wider London
Stock Exchange Group therein, is terminated or adversely modified or affected or
any action is taken or onerous obligation arises thereunder;
(iv) the value of any member of the wider London Stock Exchange Group or its
financial or trading position is prejudiced or adversely affected;
(v) any material asset or, other than in the ordinary course of business, any
asset of the wider London Stock Exchange Group being or falling to be charged or
disposed of;
(vi) the rights, liabilities, obligations or interests or business of any member
of the wider London Stock Exchange Group in or with any other person, firm or
company (or any arrangement relating to such interest or business) is
terminated, modified or adversely affected; or
(vii) any member of the wider London Stock Exchange Group ceases to be able to
carry on business under any name under which it currently does so;
(h) since 31 March 2004 (being the date to which the latest published audited
report and accounts of the London Stock Exchange were made up) and save as
publicly announced by the London Stock Exchange prior to the date of this
announcement, no member of the London Stock Exchange Group having:
(i) issued or agreed to issue or authorised or proposed the issue of additional
shares of any class or issued or authorised or proposed the issue of or granted
securities convertible into or rights, warrants or options to subscribe for or
acquire such shares or convertible securities or redeemed, purchased or reduced
or announced any intention to do so or made any other change to any part of its
share capital (save in relation to London Stock Exchange Shares issued on the
exercise of options granted prior to 31 March 2004 in the ordinary course);
(ii) recommended, declared, paid or made or proposed to recommend, declare, pay
or make any dividend, bonus or other distribution other than dividends lawfully
paid to the London Stock Exchange or wholly-owned subsidiaries of the London
Stock Exchange;
(iii) authorised or proposed or announced its intention to propose any merger or
acquisition or disposal or transfer of assets or shares or any change in its
share or loan capital;
(iv) issued or authorised or proposed the issue of any debentures or incurred or
increased any indebtedness or contingent liability;
(v) disposed of or transferred, mortgaged or encumbered any asset or any right,
title or interest in any asset or entered into or varied any contract,
commitment or arrangement (whether in respect of capital expenditure or
otherwise) which is of a long term or unusual nature or which involves or could
involve an obligation of a nature or magnitude which is material or authorised,
proposed or announced any intention to do so;
(vi) entered into or varied or proposed to enter into or vary any contract,
reconstruction, amalgamation, arrangement or other transaction which is of a
long term or unusual or onerous nature or is otherwise than in the ordinary
course of business or announced any intention to do so;
(vii) entered into, or varied the terms of, any service contract or agreement
with any of the directors or senior executives of the London Stock Exchange;
(viii) taken or proposed any corporate action or had any legal proceedings
started or threatened against it for its winding-up, dissolution or
reorganisation or for the appointment of a receiver, administrator,
administrative receiver, trustee or similar officer of all or any of its assets
and revenues;
(ix) waived or compromised any claim other than in the ordinary course of
business;
(x) made any amendment to its memorandum or articles of association;
(xi) entered into or varied or authorised, proposed or announced its intention
to enter into or vary any contract, transaction, arrangement or commitment which
is or may be restrictive on the business of any member of the wider London Stock
Exchange Group or the wider Deutsche Borse Group;
(xii) entered into any contract, commitment or agreement with respect to any of
the transactions or events referred to in this condition (h); and
(xiii) been unable or admitted that it is unable to pay its debts or having
stopped or suspended (or threatened to stop or suspend) payment of its debts
generally or ceased or threatened to cease carrying on all or a substantial part
of its business;
(i) since 31 March 2004 (being the date to which the latest published audited
report and accounts of the London Stock Exchange were made up) and save as
publicly announced prior to the date of this announcement:
(i) no litigation, arbitration, prosecution or other legal proceedings having
been instituted, announced or threatened or become pending or remained
outstanding by or against any member of the wider London Stock Exchange Group or
to which any member of the wider London Stock Exchange Group is or may become a
party (whether as plaintiff, defendant or otherwise);
(ii) no adverse change having occurred in the business, assets, financial or
trading position, profits or prospects of any member of the wider London Stock
Exchange Group;
(iii) no investigation by any Relevant Authority having been threatened,
announced, implemented or instituted or remaining outstanding;
(iv) no contingent or other liability having arisen or become apparent to
Deutsche Borse Group which might be expected to adversely affect the wider
London Stock Exchange Group;
(j) Deutsche Borse Group not having discovered that:
(i) any business, financial or other information concerning any member of the
London Stock Exchange Group disclosed, publicly or otherwise at any time to
Deutsche Borse Group, by or on behalf of any member of the London Stock Exchange
Group, either contains a misrepresentation of fact or omits to state a fact
necessary to make the information contained therein not misleading; or
(ii) any member of the wider London Stock Exchange Group is subject to any
liability, actual or contingent, which is not disclosed in the annual report and
accounts of the London Stock Exchange for the financial year ended 31 March
2004; and
(k) Deutsche Borse Group not having discovered that:
(i) any past or present member of the wider London Stock Exchange Group has not
complied with all applicable legislation or regulations of any jurisdiction with
regard to the storage, disposal, discharge, spillage, leak or emission of any
waste or hazardous substance or any substance likely to impair the environment
or to harm human health or otherwise relating to environmental matters (which
non-compliance might give rise to any liability (whether actual or contingent)
on the part of any member of the wider London Stock Exchange Group) or that
there has otherwise been any such disposal, discharge, spillage, leak or
emission (whether or not the same constituted a non-compliance by any person
with any such legislation or regulations and wherever the same may have taken
place) which in any such case might give rise to any liability (whether actual
or contingent) on the part of any member of the wider London Stock Exchange
Group;
(ii) there is or is likely to be any liability (whether actual or contingent) to
make good, repair, reinstate or clean up any property now or previously owned,
occupied or made use of by any past or present member of the wider London Stock
Exchange Group or any controlled waters under any environmental legislation,
regulation, notice, circular or order of any Relevant Authority or third party
or otherwise; or
(iii) that circumstances exist (whether as a result of the making of the Offer
or otherwise) which might lead to any Relevant Authority instituting or any
member of the wider London Stock Exchange Group or the wider Deutsche Borse
Group might be required to institute, an environmental audit or take any other
steps which in any such case might result in any actual or contingent liability
to improve or install new plant or equipment or make good, repair, re-instate or
clean up any land or other asset now or previously owned, occupied or made use
of by any member of the wider London Stock Exchange Group.
Deutsche Borse Group reserves the right to waive all or any of conditions (b) to
(k) (inclusive) above, in whole or in part. Conditions (b) to (k) (inclusive)
must be satisfied as at, or waived on or before, 21 days after the later of the
first closing date of the Offer and the date on which condition (a) is fulfilled
(or in each case such later date as the Panel may agree) provided that Deutsche
Borse Group shall be under no obligation to waive or treat as satisfied any of
conditions:(b) to (k) (inclusive) by a date earlier than the latest date
specified above for the satisfaction thereof notwithstanding that the other
conditions of the Offer may at such earlier date have been waived or fulfilled
and that there are at such earlier date no circumstances indicating that any of
such conditions may not be capable of fulfilment.
The Loan Note Alternative, if made available, will be conditional on the Offer
becoming or being declared unconditional in all respects. It will remain open
until 3.00 p.m. on the day falling 14 days after the first closing date of the
Offer and, if the Offer is then unconditional as to acceptances on the first
closing date, Deutsche Borse Group reserves the right either to close the Loan
Note Alternative on the day falling 14 days after the first closing date of the
Offer or to extend it. If, on any closing date of the Offer, the Offer is not
then unconditional as to acceptances and is extended, the right is reserved to
close or extend the Loan Note Alternative at that date. If, however, on the
first closing date on which the Offer is capable of being declared
unconditional, it is not so declared and is extended, the Loan Note Alternative
will remain open for at least 14 days thereafter but may then be closed without
prior notice. The right is also reserved to re-introduce a loan note alternative
as long as the Offer is still then not unconditional as to acceptances.
If Deutsche Borse Group is required by the Panel to make an Offer for London
Stock Exchange Shares under the provisions of Rule 9 of the UK Takeover Code,
Deutsche Borse Group may make such alterations to the conditions as are
necessary to comply with the provisions of that Rule.
The Offer will lapse if the Offer is referred to the Competition Commission or
if the European Commission initiates proceedings under Article 6(1)(c) of
Council Regulation (EC) 139/2004 or, following a referral by the European
Commission under Article 9(3) of that Regulation to a competent authority in the
United Kingdom, there is a subsequent reference to the Competition Commission,
in either case before the later of the first closing date of the Offer and the
date when the Offer becomes or is declared unconditional as to acceptances.
3. Further Terms Of The Offer And The Loan Note Alternative
The Offer will (subject to the satisfaction of the Pre-condition) be made on the
terms and subject to the conditions which are set out in Appendix I and this
Appendix II, those terms which will be set out in the formal Offer Document and
(in respect of London Stock Exchange Shares in uncertificated form) the Form of
Acceptance and such further terms as may be required to comply with the
provisions of the UK Takeover Code. The Offer will be governed by English law
and will be subject to the jurisdiction of the courts of England.
APPENDIX III
SOURCES AND BASES OF INFORMATION
(i) The value placed by the Offer on the issued and to be issued share capital
of the London Stock Exchange is based on 259,276,039 London Stock Exchange
Shares, being the number of London Stock Exchange Shares in issue at the close
of business on the business day prior to the date of this announcement together
with the shares issuable under the London Stock Exchange Share Options Schemes.
(ii) Unless otherwise stated, the financial information relating to the London
Stock Exchange is extracted from the audited consolidated financial statements
of the London Stock Exchange for the relevant financial year.
(iii) The financial information relating to the Deutsche Borse Group is
extracted from the audited consolidated financial statements for Deutsche Borse
Group for the year ended 31 December 2003 and has been prepared in accordance
with IFRS accounting standards.
(iv) An exchange rate of €1.4398 = £1 has been used throughout this
announcement.
(v) Combined sales, EBIT and financial results stated in respect of the New
Group have been obtained by combining the relevant financial information for
Deutsche Borse Group in respect of the year ended 31 December 2003 with the
relevant financial information for the London Stock Exchange in respect of three
quarters of the relevant figure for the year ended 31 March 2004 and one quarter
of the relevant figure for the year ended 31 March 2003.
APPENDIX IV
DEFINITIONS
The following definitions apply throughout this announcement unless the context
otherwise requires:
'AIM' AIM, a market of the London Stock Exchange
'Board' in respect of Deutsche Borse Group or the New Group, the
members of the Executive Board and/or Supervisory Board of
Deutsche Borse or any duly appointed committee thereof, and in
respect of the London Stock Exchange, the board of directors
of the London Stock Exchange
'business day' a day, not being a Saturday or Sunday, on which clearing banks
in both the City of London and Frankfurt or public holiday are
open for normal business
'CREST' the relevant system (as defined in the Regulations) operated
by CRESTCo
'CRESTCo' CRESTCo Limited
'Deutsche Deutsche Borse AG and, as the context requires, the wholly
Borse' owned subsidiary of Deutsche Borse AG making the Offer
'Deutsche Borse Deutsche Borse and any of its wholly owned subsidiaries,
Group' or the including newly incorporated companies formed for the purposes
'Group' of the Offer
'Executive the members of the Executive Board of Deutsche Borse who shall
Board' accept responsibility for the contents of the Offer Document
'Form of the form of acceptance, authority and election for use by the
Acceptance' London Stock Exchange Shareholders in connection with the
Offer that will accompany the Offer Document
'FSA' the Financial Services Authority
'Loan Notes' the £1 nominal loan notes to be issued by Deutsche Borse
Group
'Loan Note the loan note consideration to be offered pursuant to the
Alternative' further terms of the Offer
'London Stock London Stock Exchange plc
Exchange'
'London Stock the London Stock Exchange Executive Share Option Plan and the
Exchange Share London Stock Exchange SAYE Share Option Scheme
Option Schemes'
'the London Stock the holders of London Stock Exchange Shares
Exchange
Shareholder'
'London Stock the existing unconditionally allotted or issued and fully paid
Exchange ordinary shares of five pence each in the capital of the
Shares' London Stock Exchange and any further ordinary shares which
are unconditionally allotted or issued and fully paid before
the date on which the Offer closes (or such earlier date or
dates, not being earlier than the date on which the Offer
becomes or is declared unconditional as to acceptances or, if
later, the first closing date of the Offer, as Deutsche Borse
Group, subject to UK Takeover Code, may decide) but excluding
in both cases any such shares held or which become held in
treasury
'New Group' the combined entity of the London Stock Exchange and Deutsche
Borse following the Offer, if made, having become or been
declared unconditional in all respects
'Offer' the proposed offer to be made outside the US by Goldman Sachs
International on behalf of Deutsche Borse Group and (if made
to US shareholders) in the US by Deutsche Borse Group (subject
to satisfaction or waiver of the Pre-condition) to acquire the
whole of the issued and to be issued share capital of the
London Stock Exchange on the terms and subject to the
conditions described in this announcement, the Offer Document
and (in the case of shares in uncertificated form) the Form of
Acceptance including (where the context so requires) any
subsequent revisions, variation, renewal or extension
thereof
'Offer the document to be sent to London Stock Exchange Shareholders
Document' containing the Offer
'Official List' the Daily Official List of the London Stock Exchange
'Panel' the Panel on Takeovers and Mergers
'Pre-condition' the pre-condition referred to in paragraph 1 of this
announcement, namely that the Board of the London Stock
Exchange resolves to give an unqualified and unconditional
recommendation to its shareholders to accept the Offer
'Regulations' the Uncertificated Securities Regulations 2001 (SI 2001 No
3755)
'Relevant has the meaning given to that term in paragraph 2(d) of
Authority' Appendix II to this announcement
'Securities United States Securities Act of 1933, as amended
Act'
'UK Companies the Companies Act 1985, as amended
Act'
'UK Listing the Financial Services Authority acting in its capacity as the
Authority' or competent authority for the purpose of Part VI of the
'UKLA' Financial Services and Markets Act 2000
'UK Takeover the City Code on Takeovers and Mergers
Code'
'uncertificated' in respect of a share, recorded on the relevant register of
or in the share concerned as being held in uncertificated form in
'uncertificated CREST, and title to which, by virtue of the Regulations, may
form' be transferred by means of CREST
'United Kingdom' the United Kingdom of Great Britain and Northern Ireland
or 'UK'
'United States' the United States of America, its territories and possessions,
or 'US' any state of the United States of America and the District of
Columbia and all other areas subject to its jurisdiction
'US Person' a US person as defined in Regulation S under the Securities
Act
'wider Deutsche has the meaning given to that term in paragraph 2(d)(iii) of
Borse Group' Appendix II to this announcement
'wider London has the meaning given to that term in paragraph 2(d)(iii) of
Stock Exchange Appendix II to this announcement
Group'
This information is provided by RNS
The company news service from the London Stock Exchange
