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London, Frankfurt Boerses May Merge

April 5, 2000

LONDON (AP) _ The London and Frankfurt stock exchanges are holding initial, ``significant″ talks about a possible merger similar to the three-way union formed last month by the exchanges in Paris, Brussels and Amsterdam, the Financial Times reported Wednesday.

Officials at the two exchanges _ the largest national stock exchanges in Europe _ refused to comment on the report, which said that the exchanges aren’t close to announcing a merger and that ``significant problems″ still lie ahead.

The London and Frankfurt exchanges announced a joint effort two years ago to build a common trading platform for European blue chip stocks. However, they dropped the plan after apparently disagreeing about which technology to use and the need to include additional European stock exchanges.

The Financial Times, citing people familiar with the merger talks, said the obstacles to a deal include the valuations of the two exchanges, which would determine their relative shares in a combined business.

The market capitalization of companies listed on the London exchange is more than $8.3 trillion. The Deutsche Boerse has a market capitalization of $1.5 trillion.

However, the newspaper noted that revenue at the Deutsche Boerse is much larger than revenue at the London Stock Exchange because the German operator also has divisions dealing with derivatives markets and the clearing and settlement of trading transactions.

An official at the London Stock Exchange said the exchange has continued to talk with the Frankfurt bourse and was keeping its strategic options open.

The London exchange restructured last month to change from being a member-owned organization into a for-profit company controlled by its shareholders. This should help speed up the London market’s ability to respond to competitive pressures in an era of intensified electronic trading.

For its part, the Deutsche Boerse plans later this spring to sell shares to the public to broaden its ownership structure, particularly among foreign investors, spokeswoman Sylvia Herbrich said from her office in Frankfurt.

Stock exchanges in Paris, Amsterdam and Brussels have moved ahead with a merger of their own, announcing last month that they would unite to form Euronext, the largest single stock exchange in continental Europe.

The combined market capitalization of companies listed on the three bourses will be $2.3 trillion, vaulting Euronext ahead of Frankfurt as the continent’s biggest stock exchange. Euronext hopes to complete its merger by October.

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