Deutsche Börse has agreed terms for the acquisition of Cedel's fifty per cent stake in Clearstream, in a deal which values the Luxembourg-based clearer at EUR3.2 billion.
Cedel shareholders will receive EUR1.6 billion plus an amount representing the net asset value of Cedel's other assets, estimated at no less than EUR150 million. The offer is expected to be initiated no later than 28 February, 2002 and will extend for six weeks.
The acquisition has been opposed by some of Europe's leading investment banks - and Clearstream's biggest customers - who claim that the vertical integration of the clearing agency within the Frankfurt exchange will eventually push up costs. JP Morgan Chase and UBS have already threatened to shift their business to rival Euroclear in protest at the takeover. They would have preferred a merger between Clearstream and Cedel.
Clearstream CEO André Roelants counters that the deal has the backing of other big users, including Barclays, Citigroup and ING. "This deal will enable Clearstream to extend its strong growth record and to make even bigger improvements to its highly competitive service offerings to the market," he says.
Deutsche Börse is staking a lot on the acquisition. The price, at about 20 times earnings, effectively empties the exchange's war chest at a time of looming consolidation in the European equities markets. However, Clearstream promises to be highly cash generative, increasing the Börse's net income by 30 to 35% for 2002. The longer-term benefits are still unclear, and much will depend on the market's response to the new ownership structure.
Deutsche Börse expects to achieve significant annual cost synergies in the areas of improved operational efficiency, coordination of IT project development and spending and other administrative costs. There are no immediate plans for compulsory redundancies, but the exchange expects to reduce Clearstream's reliance on external consultants and cut staff numbers by natural attrition.
André Roelants will remain CEO and will also join the management board of Deutsche Börse as its deputy CEO. A further member of Clearstream's group executive management will also be appointed to Deutsche Börse's management board. Robert Douglass will continue as chairman of Clearstream´s board of directors.