London Stock Exchange Is in Merger Talks With German Rival

London Stock Exchange Group Plc is in merger talks with Deutsche Boerse AG, a tie-up that would create one of the biggest exchange companies in the world.

Shares in the market operators soared as the companies confirmed in a statement on Tuesday that they are considering a deal. Should the all-share merger take place, LSE Group equity holders would own 45.6 percent of the enlarged group, while Deutsche Boerse stockholders would get 54.4 percent.

The chief executive officers of both companies are keen dealmakers. LSE Group head Xavier Rolet has bought an index provider and expanded into clearing, while Deutsche Boerse boss Carsten Kengeter spent $1.5 billion in his first 60 days in charge of Europe’s largest derivatives exchange.

If approved by regulators, the deal would create a titan in an industry already dominated by a handful of companies. Intercontinental Exchange Inc. became a global powerhouse in part through its dealmaking, such as the 2013 purchase of NYSE Euronext, which gave it a derivatives business called Liffe.

An LSE-Deutsche Boerse deal would also create a stronger rival to CME Group Inc., the world’s largest derivatives market. That company was formed by the Chicago Mercantile Exchange’s 2007 acquisition of the Chicago Board of Trade. Then a year later, CME bought the New York Mercantile Exchange.

The discussions are taking place against an uncertain backdrop for Britain’s place in Europe. U.K. voters decide on June 23 whether to stay in the European Union. LSE Group’s Rolet, along with 35 other chairmen or CEOs of FTSE 100 companies, signed a letter to The Times today urging Britons not to leave the EU.

Rolet has repeatedly argued that there’s room for only a handful of firms to operate trading venues, clearing and related services around the globe, and the U.K. must ensure one of its companies is among them.

“It’s very, very important in the context of the connectivity between the Americas, China as we’ve heard, and Europe, and of course London” that one of these global companies is based in the U.K., Rolet said in a March Bloomberg Television interview.

Discussions between companies don’t necessarily mean a deal will take place. The talks are ongoing, according to today’s statement. Should the firms agree to merge, their key businesses will continue to operate under their existing brand names. The board would have an equal number of directors from both companies.

LSE’s shares jumped 13 percent to 2,607 pence at 3:33 p.m. in London, their biggest rally since 2009. All of the gains came after 1 p.m. Deutsche Boerse climbed 4.6 percent to 79.84 euros. Shares jumped after Reuters said the companies are in the early stages of exploring a possible merger.

Deutsche Boerse tried to buy a smaller version of London Stock Exchange in 2005. It dropped its bid after shareholders led by hedge funds opposed the plan. The flop led to the ouster of former CEO Werner Seifert. The company in 2004 failed to buy SWX Swiss Exchange.

Kengeter’s predecessor, Reto Francioni, led Deutsche Boerse for about a decade. Francioni’s most famous deal was one that didn’t happen: an attempt to purchase NYSE Euronext, which was rejected by the European Commission in 2012. Francioni called it a “black day for Europe.”