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LSE scuppers Deutsche Boerse merger hopes by rejecting EU demand

The London Stock Exchange (LSE. L) has all but ended a planned merger with Deutsche Boerse (DB1Gn. DE) to create Europe's biggest stock exchange by ruling out meeting a European antitrust demand, saying it has strong prospects alone. In a bid to create a European trading powerhouse that would better compete against U.S. rivals making inroads on their home turf, the two exchanges struck a 29 billion euro ($30.1 billion) deal just over a year ago. But in a highly unusual step, the London Stock Exchange (LSE) on Sunday preempted a European Commission antitrust decision, saying it was unlikely to give clearance for the merger after the London bourse had refused to sell an electronic trading platform in Italy. The exchange added that it would still work to make the merger with Deutsche Boerse succeed, but that would be impossible unless the Commission, which declined to comment, changed its position. The plan to create what the head of Deutsche Boerse dubbed a financial bridge between continental Europe and Britain, had been called into question by Brexit, with German politicians demanding Frankfurt not London be the headquarters of the group because Britain would be leaving the trading bloc. Deutsche Boerse said that decision not to sell the MTS trading platform had been made by the LSE, adding that it expected a decision by the Commission by the end of the month. Shares in Deutsche Boerse slipped by more than 2 percent at the opening of trading in Frankfurt on Monday, while LSE stock was down by about 1 percent.

The LSE had said in a statement late on Sunday that the Commission had asked it to sell its 60 percent stake in fixed-income trading platform MTS to satisfy antitrust concerns over the merger of Europe's two largest market operators. DISPROPORTIONATE

Calling the request "disproportionate," the British exchange said it believed that it would struggle to sell MTS and that such a sale would be detrimental to its business. "Based on the commission's current position, LSE believes that the Commission is unlikely to provide clearance for the merger," it said. The exchanges had already agreed to sell part of LSE's clearing business, LCH SA, in order to satisfy antitrust requirements. LSE said the Commission had also raised concerns this month about the impact on the European market landscape of access to bond and repo trading feeds were the two exchanges to merge. LSE said it had offered certain proposals to address this but that the commission had requested they sell all of MTS instead.

MTS is a small part of LSE's business but it said it was a major platform for trading European government bonds, particularly in Italy, and that it was "systemically important". LSE said that such a sale would need regulatory approval from several governments in Europe, and it would be detrimental to its wider Italian business."Taking all relevant factors into account, and acting in the best interests of shareholders, the LSE Board today concluded that it could not commit to the divestment of MTS," the exchange said.

PSA pays GM $2.3 billion for Opel, sets first recovery goals

PSA Group (PEUP. PA) has agreed to buy Opel from General Motors (GM. N) in a deal valuing the business at 2.2 billion euros ($2.3 billion), creating a new regional car giant to challenge market leader Volkswagen (VOWG_p. DE). The maker of Peugeot and Citroen cars vowed to return Opel and its British Vauxhall brand to profit, with an operating margin of 2 percent within three years and 6 percent by 2026 underpinned by with 1.7 billion euros in joint cost savings."We're confident that the Opel-Vauxhall turnaround will significantly accelerate with our support," PSA Chief Executive Carlos Tavares said in a statement issued by the two carmakers on Monday. By acquiring Opel, the French group leapfrogs rival Renault (RENA. PA) to become Europe's second-ranked carmaker by sales, with a 16 percent market share to VW's 24 percent. Last year, PSA and GM Europe recorded 72 billion euros in revenue and 4.3 million vehicle deliveries between them.

GM will receive 1.32 billion euros for the Opel manufacturing business - 650 million euros in cash and 670 million in PSA share warrants. The Paris-based carmaker and BNP Paribas (BNPP. PA) will pay a further 900 million euros for the Opel financing arm and operate it as a joint venture, fully consolidated by the French bank. The sale of Opel seals GM's exit from Europe. Eight years after coming close to selling Opel to Magna International (MG. TO), the Detroit auto giant has faced investor pressure to offload the business and focus on raising profitability rather than chase the global sales crown currently held by VW.

After fending off 2015 merger overtures by Fiat Chrysler (FCHA. MI) with support from her board, GM boss Mary Barra agreed to target a 20 percent minimum return on invested capital and pay out more cash to shareholders. The two carmakers, which already share some production in an existing European alliance, confirmed last month they were negotiating an outright acquisition of Opel and its British Vauxhall brand by PSA, sparking concern over possible job cuts.

The transaction also sees GM retain most of Opel's pensions deficit, estimated by analysts at $10 billion. Earlier in the talks, the U.S. carmaker had sought to offload a larger share of the liabilities, sources have said. Some smaller pension funds will be transferred to PSA, along with a 3 billion euro payment to cover their full settlement, the companies said on Monday. GM will also take an accounting charge of $4 billion to $4.5 billion in relation to the deal, expected to close in late 2017.