CME Group's Merger Talks Denied By Deutsche Boerse – ValueWalk Premium

CME Group's Merger Talks Denied By Deutsche Boerse

On Monday, Deutsche Boerse AG (ETR:DB1) (FRA:DB1) kicked off the new week with a 10 percent rise in its shares thanks to merger rumors with CME Group Inc (NASDAQ:CME).

CME Group's Merger Talks Denied By Deutsche Boerse

A Bloomberg story got the ball rolling with a report that CME had contacted the exchange about a possible merger prior to the end of last year, but Deutsche Boerse was apprehensive to engage in formal talks. This came before Intercontinental Exchange Inc. (NYSE:ICE) announced its Dec. 20 plans to purchase NYSE Euronext (NYSE:NYX).

After CME approached Deutsche Boerse in December, the two supposedly met in January and discussed whether or not to hold formal takeover talks; this had neither included an offer nor terms, according to Bloomberg. Deutsche Boerse has said it is wary to enter talks and it is currently not in merger discussions.

This follows Deutsche Boerse's failed NYSE Euronext (NYSE:NYX) takeover; it had been halted by European regulators last February after they had expressed competitive concerns for derivatives and clearing.

Just last week, Deutche Boerse's CEO Reto Francioni said his exchange would focus on growing independently but was still open to joint ventures, reported The Street. This was reiterated by the exchange on Monday.

“As repeatedly communicated, Deutsche Boerse Group's primary strategic focus is on organic growth, mainly by expanding its business into growth regions in Asia, extending its services for unsecured and unregulated markets, and expanding its combined market data and IT business,” The exchange said in a statement.

A CME Group Inc (NASDAQ:CME) and Deutsche Boerse AG (ETR:DB1) (FRA:DB1) mergerwould marry the largest U.S. futures exchanges with the largest one in Europe but it could again draw antitrust risk.

Peter Lenardos from RBC Capital Markets wrote in a note on Monday, “If a merger were to be pursued, the deal could take nine to 12 months to complete. We anticipate political and antitrust risk, since the combination would bring together the largest futures exchanges in the U.S. and European markets.”

Meanwhile, CME will forge ahead with its plans to launch a European futures trading unit in London. The company announced its plans back in August. This comes in an effort to challenge Deutsche Boerse's Eurex business and NYSE Euronext (NYSE:NYX)'s LIFFE unit duopoly. It also represents the exchange's first solo foray into this overseas marketplace.

At the time, CME Group Inc (NASDAQ:CME)'s CEO Phupinder Gill said, “Our application to establish an exchange in Europe fits within our strategy to grow organically and is an important next step to meet the growing regional demand from our customers. Launching with a suite of FX products allows us to leverage our 40 years of experience in FX futures for customers in the region who access the futures market during the London business day, but we also plan to look at expanding into additional asset classes.”

The exchange is expected to launch in the middle of the year.

CME Group Inc (NASDAQ:CME) is currently up 0.31 percent, trading at $58.49 while Deutsche Boerse AG (ETR:DB1) (FRA:DB1) is up 5.61 percent, trading at $49.30.


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