Dealer interest delays LCH.Clearnet and DTCC deal

The Depository Trust & Clearing Corporation (DTCC) has pushed back the deadline for its takeover talks with LCH.Clearnet, in the face of a rival bid from a group of major dealers.

The two sides entered into a non-binding merger agreement on October 22 last year, under which DTCC offered to pay LCH.Clearnet shareholders around €10 a share. However, the March 15 deadline for concluding discussions on the merger has been put back until March 31, an official at DTCC said.

BNP Paribas, Deutsche Bank, HSBC, JP Morgan, Royal Bank of Scotland, Societe Generale, UBS, and Icap, have joined forces to make a counter offer for the firm - a move seen by some as an attempt by dealers to exert greater influence in the over-the-counter derivatives clearing space. However, to date no firm offer has been made by the consortium.

The DTCC official noted its offer has also been hindered by a proposed leveraged buy-out by LCH.Clearnet of its shareholders, as well as unexpected complexities in the due diligence process.

Meanwhile, on March 11, LCH.Clearnet opened an office in New York to “establish a presence in the US” and to “provide support to a number of clearing initiatives in North America”. These include the Nodal Exchange, an electronic commodities exchange due to be launched early this year, and clearing of credit default swaps with NYSE Liffe, its UK partner.

Ed Watts, formerly managing director of operations at Goldman Sachs, will head the New York office. Previously, Watts was a member of the board of the DTCC, and also was chairman of the board of directors at the Government Securities Clearing Corp and the Mortgage Backed Securities Clearing Corp, both of which are DTCC subsidiaries.

See also: LCH.Clearnet bid sparks conflict of interest fears
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The fight is on for LCH
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