A group of banks, dubbed the Lily consortium, has withdrawn its bid for European clearing house LCH.Clearnet because it has achieved its dual aim of blocking a rival offer and granting its members greater representation on the LCH board.
The Lily consortium – which includes inter-deal broker ICAP and collectively owns 50% of LCH.Clearnet – bid €830 million for the clearer in May following the collapse of merger talks between LCH and US post-trade utility The Depository Trust & Clearing Corporation (DTCC). Lily first signalled its intention to make a rival bid in February.
DTCC made a €739 million bid for LCH.Clearnet last October, but withdrew its offer in April citing frustration with repeated delays to the process.
At the time, sources familiar with the situation said that the consortium thought the European clearer would operate more effectively as a for-profit organisation that operated under a profit cap, rather than converting to an at-cost, user-owned and governed clearer, as would have happened if the DTCC bid was successful.
After receiving the bid from Lily in May, LCH.Clearnet proposed a plan, known as Marigold, to rebalance its shareholder structure, which shareholders voted on and approved last week.
Under the plan the group will pay its non-client shareholders a total of €333 million in return for the 33,300,000 shares they collectively hold. LCH’s largest shareholder, EuroClear Bank, agreed to have its 11,712,001-share stake redeemed on 24 September.
Removal of the non-client shareholders gives LCH’s clients, including the Lily consortium members, a greater representation on its board.