Intercontinental Exchange Opts Not to Bid for London Stock Exchange -- 3rd Update

By Lisa Beilfuss 

New York Stock Exchange operator Intercontinental Exchange Inc. said Wednesday that it doesn't intend to make an offer for London Stock Exchange Group PLC, likely paving the way for the U.K. exchange's merger with Germany's Deutsche Börse.

ICE said it couldn't confirm the potential market and shareholder benefits of a deal and therefore wouldn't make an offer.

The company had said in March that it was considering an offer for LSE after it agreed to combine with Deutsche Börse in a deal that would establish Europe's biggest stock-exchange operator. That pact was thought to set the stage for a potential bidding war, as U.S. competitors such as Atlanta-based ICE and CME Group Inc. considered their next moves.

LSE shares declined 6.9% on the news, while Deutsche Börse rose 5.1% and ICE was inactive premarket.

Analysts and industry executives have said that among the attractive features of LSE, the real prize is its majority stake in a company called LCH.Clearnet Group Ltd., a so-called clearinghouse that plays an important role in the market for global interest-rate swaps, bonds and other instruments.

ICE in particular has made the business of clearing a pillar of its global constellation of futures and stock exchanges.

ICE's interest in LSE's clearing business was in some ways similar to its $8.2 billion acquisition of the owner of the New York Stock Exchange in 2013. In that deal, ICE's primary target was the London International Financial Futures and Options Exchange, known as Liffe. The NYSE was viewed as a problematic asset in need of significant cost cuts.

The all-share agreement between Deutsche Börse and LSE would form a combined company with a market value of about $30 billion, and would be 45.6%-owned by LSE shareholders and the remainder by Deutsche Börse shareholders.

ICE's announcement came as it reported higher earnings and revenue for its first quarter.

Trading volume picked up in the quarter, driving transaction fees higher. Like some of its rivals, volume snapped back for ICE after a rough end to 2015. CME similarly reported increased earnings for the first quarter thanks in part to renewed trading interest after global economic concerns spooked traders and investors late last year. For ICE, trading volume rose 9.6% during the quarter, pushing transaction and clearing fees up 11% to $929 million.

ICE has been snapping up firms in a bid to grow its footprint and broaden its revenue base. ICE last year bought Interactive Data Corp., giving it hard-to-get pricing data on corporate bonds, as well as London-based energy-trading venue Trayport.

ICE's acquisition of IDC has been helping to propel results, and first-quarter data and services revenue rose to $477 million from $206 million a year earlier -- now representing more than 30% of the company's top line.

In all, profit grew to $369 million, or $3.08 a share, up from $315 million, or $2.80 a share, a year earlier. Excluding merger-related costs, among other items, earnings rose to $3.68 a share from $3.06.

Revenue jumped 32% to $1.55 billion. Analysts projected $3.65 in adjusted earnings per share on $1.16 billion in sales, according to Thomson Reuters.

Write to Lisa Beilfuss at [e-mail]

(END) Dow Jones Newswires

May 04, 2016 08:37 ET (12:37 GMT)

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