LSE Offer Fails to Fix Refinitiv Deal, Rivals Set to Warn EU

London Stock Exchange Group Plc’s rivals are set to warn European Union regulators that the company’s promises to offer them access to data fails to resolve antitrust concerns over LSE’s $27 billion takeover of Refinitiv.

At least two competitors will tell the EU that LSE’s current concessions won’t curb its increased power over interest rate derivatives and information services, according to people familiar with the matter who asked not to be named because the so-called market test of the LSE offer is private.

The rivals will also raise concerns that LSE may not be subject to Europe’s MiFID II markets rules after Brexit, handing it an unfair advantage, the people said. EU regulators can ask for binding commitments in return for merger approval, that could potentially address some of these issues, they said.

The closely watched deal review could set a precedent for future mergers as exchange groups seek to diversify business models away from volatile trading revenues and into lucrative data and subscription services. Scrutiny of the deal comes as EU Competition Commissioner Margrethe Vestager has expressed concerns about how some companies can amass data and become gatekeepers for an industry.

EU regulators are seeking feedback by a Nov. 12 deadline on LSE’s package of commitments, which includes the sale of Borsa Italiana to respond to EU concerns over euro government bond trading.

LSE’s purchase of Refinitiv would create a powerhouse with global scale across a swathe of financial markets in Asia and the U.S., with a presence in stock, debt and swaps trading, data, clearing and indexes. It would compete with index providers such as MSCI Inc., data companies including Bloomberg LP, the parent of Bloomberg News, and derivatives clearinghouses like Eurex and CME Group Inc.

Negative Comments

While negative comments on an offer can convince the EU to take a tougher stance, they don’t always derail a deal’s approval and the companies have time to make minor changes before the EU’s Jan. 15 deadline.

The European Commission didn’t immediately respond to a request for comment and a spokeswoman for LSE declined to comment.

The EU usually has a strong preference for clear-cut divestments to resolve antitrust concerns due to the difficulty of overseeing pledges to change the way a business operates.

Regulators shunned an access offer during their review of NYSE-Euronext’s plans to merge with Deutsche Boerse AG after flagging concerns that it would be unworkable.

The EU also warned that commitments on future behavior “may be acceptable only exceptionally” in very specific circumstances. The NYSE-Deutsche Boerse tie-up was vetoed in 2012.

The EU previously flagged potential issues with LSE and Refinitiv’s combined large market share for European government bond trading, trading and clearing of interest-rate derivatives, consolidated real-time data feeds and desktop solutions as well as index licensing citing the possibility that rivals could be shut out from accessing important Refinitiv data.

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