The London Stock Exchange’s £24billion merger with Germany’s Deutsche Borse looks set to be blocked by the European Commission.
The LSE has failed to meet the Commission’s demands, after Brussels had ordered the London bourse to sell its majority stake in its Italian business MTS.
The Commission gave the exchange until this morning to sell MTS, but the LSE labelled the demand ‘disproportionate’.
Collapse: The LSE said its deal with Deutsche Borse was unlikely to be approved by the European Commission
The LSE said last night: ‘Based on the commission’s current position, LSE believes that the commission is unlikely to provide clearance for the merger.
‘Nevertheless, the LSE board remains convinced of the strategic benefits of the merger and recognises the strong support from shareholders for the transaction.
‘LSE will continue to take steps to seek to implement the merger.’
MTS is a small part of LSE’s business but it is a major platform for trading European government bonds, particularly in Italy.
The LSE had already agreed to sell part of its clearing business, LCH, in order to satisfy antitrust requirements.
Critic: Lord Lawson has been a critic of the deal
The Commission is expected to reach its decision on the merger by the end of this month.
Many in the City of London have been sceptical about the deal after German politicians demanded Frankfurt be the headquarters of the group.
Last week, 40 Eurosceptic City figures wrote a letter to The Times, calling for the merger to be delayed until after Brexit negotiations.
The City wants the deal postponed until at least Britain’s future relationship with the European Union has been settled.
Deutsche would control 54 per cent of the business, with the signatories to last week’s letter fearing that Frankfurt may try to grab London’s lucrative euro clearing business too.
Britain’s departure from the EU may isolate London as Europe’s financial centre and that has turned the tables in favour of Frankfurt.
Shares in LSE fell 2per cent, or 63p, at 3062p this session.
Earlier this month, the merger was dealt a hammer blow after Deutsche Boerse chief executive Carsten Kengeter had his Frankfurt apartment raided by police amid a probe into suspected insider trading.
Kengeter bought €4.5million (£3.85million) of stock in the exchange he runs in 2015 only two months before it announced merger talks with the London Stock Exchange.
State prosecutors in Frankfurt said the investigation centred on whether secret merger talks with the London Stock Exchange were under way when he bought the shares.