London's LCH clearing house opts for Stock Exchange bid

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The London Stock Exchange (LSE) is set to secure a €1bn (£870m) takeover of LCH.Clearnet after rival bidder Markit announced its offer for the London-based clearing house had been rejected.

The board, which comprises LCH.Clearnet's largest clients, has decided to favour LSE's €21-a-share offer for the 51 per cent of the clearing house that it does not already own, over financial data provider Markit's €15-a-share bid for the whole company.

Although LSE's offer still needs the backing of LCH's 98 shareholders, the deal is expected to go through and represents a boost for Xavier Rolet, the French chief executive who took over the running of the London bourse in 2009. It comes after Mr Rolet made an unsuccessful bid to merge with Canada's TMX exchange operator in the summer.

The acquisition of LCH, which acts as the main clearing house for LSE, would bring the acquirer into line with European rivals such as Deutsche Börse that own and make substantial profits from their clearing providers.

The takeover of LCH, which owns the Swapclear over-the-counter swap clearing service, would also help LSE to participate in the regulatory shake-up in the US and Europe, which will force the OTC, or "off-exchange" market, to use clearing houses.

Clearing houses such as LCH.Clearnet and Deutsche Börse's Eurex Clearing, sit between trading counterparties, ensuring that customers are not left out of pocket in the event of a default.

LSE and LCH declined to comment yesterday.