Seifert to flesh out London Stock Exchange bid

LONDON - The head of Deutsche Boerse will flesh out his plan to take over the London Stock Exchange as he seeks to win the backing of its chief Clare Furse at a meeting on Thursday, sources familiar with the matter say.

German exchange boss Werner Seifert will focus on the structure of a combined entity, outlining cost savings and benefits to customers and shareholders should a merger between the two exchanges go ahead, the sources said.

"The focus will not be the price of the bid but the structure of a merged exchange with all possible compromises being considered," one of the sources said.

Deutsche Boerse, whose initial £1.3 billion ($3.5bn) bid was rejected by the LSE as too low, is hoping the details will be enough to gain access to LSE's books, with a view to making a formal offer in the next few weeks, the sources added.

Siefert will come under pressure from rival Euronext, which has said it is considering making a counter offer and plans to meet Furse on Friday, a source close to the talks has told Reuters.

Euronext has not put a price on the table so far but any bid would have to top Deutsche Boerse's offer, putting pressure on Siefert to raise his bid further still.

At Thursday's meeting the Deutsche Boerse chief executive is expected to lay out concessions to the key shareholder, management and customer constituencies, the sources said.

These include the intention to transfer the management of Deutsche Boerse's derivatives and cash markets to London, to move two members of its executive board to London and to set up a new supervisory board that would include senior financial figures in the UK capital to oversee the exchange's operations.

Siefert will also provide details on cost savings from merging the two exchanges, as well as a new pricing structure for customers, including details of price cuts.

The German boss will also outline plans for the combined groups' governance structure and "how customers would be consulted on any changes," one of the sources said.

The deal would create a dominant European stock market which would be the second largest in the world after the New York Stock Exchange.

Shares of the LSE were trading at £5.8 at 15.52GMT (4.52am NZT), valuing it at about 1.5 billion pounds.

Landesbank Rheinland-Pfalz analyst Olaf Kayser said he expected talks to continue until Euronext presented its offer.

"The LSE is in a very comfortable position and can play Deutsche Boerse and Euronext against each other, waiting relaxed for the better offer."

Euronext chief executive Jean-Francois Theodore is expected to meet Furse on Friday, a source said. However, a bid is not expected to emerge from the pan-European exchange for weeks.

Euronext's hopes of winning the LSE could be boosted by its plan to acquire electronic bond market MTS Group.

Sources close to that process told Reuters on Tuesday that Euronext was one of a number of suitors eyeing an acquisition of MTS, which has hired US investment bank Goldman Sachs to review its strategic options.

Interdealer broker ICAP has also said it would be interested in discussing a possible bid for MTS, which is now owned by international banks and national debt agencies.

MTS boasted volumes in excess of €17 trillion ($32 trillion) in the January to November period last year and said it connected more than 1,080 participants across Europe -- making it one of the continent's leading platforms for trading of fixed income securities, particularly cash market bonds.

A deal would enable banks, brokers and fund managers to buy and sell bonds as well as stocks on the electronic platform of Euronext, which already operates the Paris, Amsterdam, Brussels and Lisbon bourses, and London's LIFFE derivatives exchange.

A merger with MTS would also strengthen Euronext's offering relative to Eurex, the world's largest futures and options exchange that is jointly operated by Deutsche Boerse and SWX Swiss Exchange.

- REUTERS