LSE tweaks LCH.Clearnet offer, extends deadline

The U.K.'s London Stock Exchange Group plc agreed to tweak its year-old offer for a majority stake in LCH.Clearnet Ltd. for a second time to accommodate a regulator-driven €320 million ($416.6 million) capital increase at the Anglo-French clearinghouse.

The companies have extended the deadline for completing the deal four times since the original agreement a year ago, most recently to Thursday, March 7. They said Thursday that the transaction would now complete by the end of June.

The per-share price will remain €15, including a €1-per-share deferred element, in line with revised terms announced in December, and London Stock Exchange will invest up to €536 million to lift its stake to 57.8% from 2.3%. The investment includes €185 million for its pro rata share of a capital raising to be priced at €10 per share. London Stock Exchange had previously expected to take up to 60% of LCH.Clearnet and the companies had in December envisaged a capital increase of €300 million.

The changes reflect a fine-tuning of the revised December agreement, under which London Stock Exchange slashed the price it would pay for LCH.Clearnet by 25% in anticipation of new capital requirements for clearinghouses emanating from the European Securities and Markets Authority and the European Banking Authority.

In September the companies had estimated that LCH.Clearnet would need between €300 million and €375 million of additional capital.

London Stock Exchange has been chasing smaller services and data providers since abandoning its C$3.6 billion ($3.6 billion) takeover of Toronto bourses operator TMX Group Inc. in June 2011. London Stock Exchange doesn't own a clearinghouse and it and other bourse operators anticipate strong growth at these businesses amid a regulatory push to monitor more closely the trading of derivatives through centralized clearing services.

"Our partnership with LCH.Clearnet will be transformative," said London Stock Exchange CEO Xavier Rolet in a statement. "This new-style open-access clearing model, will build upon the successes we have already had with our existing equity and fixed income trading partnerships, Turquoise and MTS."

As part of Thursday's deal Nasdaq OMX Group Inc. will buy new shares in LCH.Clearnet to lift its stake to 5% from 3.7%, and CEO Bob Greifeld will join the board.

Regulators will need to confirm that their approvals of the previous deal still stand, said the companies. They are still waiting for a "non-objection" letter from the U.K.'s Financial Services Authority.

Shareholders owning 75% of LCH.Clearnet must back the takeover, while a simple majority must approve the capital raising. The companies said they already had outline agreements from owners of 72.9% of LCH.Clearnet in favor of the takeover.

LCH.Clearnet is 83% owned by its bank and brokerage customers.

LCH.Clearnet CEO Ian Axe, and Chairman Jacques Aigrain will stay on after the takeover, with Aigrain joining London Stock Exchange's board and Axe its executive committee.

London Stock Exchange's advisers include Morgan Stanley's Matthew Jarman and Max Mesny.

LCH.Clearnet's advisers are JPMorgan & Co.'s Jeremy Capstick and Giuseppe Esposito. Counsel is from Clifford Chance LLP's Patrick Sarch, Alastair Mordaunt and Simon Gleeson.