London Stock Exchange shares drop 10% as NYSE operator shuns bid leaving the way clear for agreed £20bn German merger

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Shares in the London Stock Exchange dropped 10 per cent in early afternoon trading after the owner of the New York Stock Exchange said it will not pursue a takeover of the UK bourse operator.

The move by the Intercontinental Exchange paves the way for a previously agreed £20billion merger between the LSE and Germany's Deutsche Boerse, which the US firm had threatened to gatecrash.

In a statement, ICE said: ‘Following due diligence on the information made available, ICE determined that there was insufficient engagement to confirm the potential market and shareholder benefits of a strategic combination.

‘Therefore, ICE has confirmed that it has no current intention to make an offer for London Stock Exchange Group.’

Equals: Today's move by the Intercontinental Exchange paves the way for a previously agreed £20billion merger between the LSE and Germany's Deutsche Boerse, which the US firm had threatened to gatecrash.

In reaction, LSE shares on the FTSE 100 index shed 9.9 per cent, or 265p at 2,424p. Deutsche Boerse shares in Frankfurt rose 4 per cent, or €3.13 to €73.80.

Billed as a 'merger of equals', the takeover deal will see LSE shareholders own 45.6 per cent of the joint firm and Deutsche Boerse the remaining 54.4 per cent.

LSE Group - which also owns index operator FTSE - is considered one of the 'three pillars' of the City of London, along with the Bank of England and insurance market Lloyd's of London.

Under the merger plans, announced on March 16, LSE and Deutsche Boerse will maintain headquarters in London and Frankfurt and be listed on both cities' exchanges.

Nearly 16 years after their first attempt to merge, the deal will bring together the might of London as one of the world's biggest financial centres and Frankfurt - the home of the European Central Bank with access to Europe's largest economy.

The agreed all-share deal will see LSE CEO Xavier Rolet step down, with Deutsche Boerse boss Carsten Kengeter to become chief executive of the combined company and LSE's Donald Brydon taking up the role of chairman.

Details of the deal also showed that the new company will aim to save £353million a year following the merger, which is set to complete by the end of this year or first quarter of 2017.

The savings will come partly from job cuts, as well as by combining their two IT systems.

In March, the UK stock exchange operator reported adjusted pre-tax profits of £643.4million for the year ended December 31, up from £491.7million a year earlier. 

LSE's revenue increased by 78 per cent to £2.3billion during the period, up from £1.3billion in 2014.