Deutsche Börse and the London Stock Exchange said they expected to cut costs by €450m (£354m) a year as they sought to press on with their agreed £20bn deal and ward off a potential rival bid from the US.

The exchanges set out the terms and benefits of what they described as a merger of equals. As expected, Deutsche Börse shareholders will own 54.4% of the new company with LSE shareholders owning the remainder.

After the potential deal was announced last month, Intercontinental Exchange (ICE), the owner of the New York Stock Exchange, revealed it was considering making a rival offer for LSE. ICE was reported to have hired investment bankers to advise on a potential deal and Chicago’s CME Group was also said to be watching events with a view to making a bid.

Carsten Kengeter, Deutsche Börse’s chief executive, said: “ICE caused some speculation and have confirmed that they have a certain interest in LSE but that is all they did. What we have here is an agreed merger of equals. This is what we are doing and we are not going to be diverted by anything or anybody else.”

The planned deal is the third time Deutsche Börse and LSE have tried to merge. They agreed to merge in 2000 before a rival bid for the LSE from Sweden’s OM Gruppen scuppered the deal, which was then rejected anyway. The LSE then rejected a formal £1.3bn offer from Deutsche Börse in January 2005.

Deutsche Börse and LSE said the €450m of cuts would equal 20% of their combined operating costs and would take three years to achieve. They said detailed plans had not been drawn and that the impact on employees could not be calculated yet. There will also be revenue gains from selling more services to customers and European companies will benefit from greater access to capital funding, they said.



John Colley, a professor at Warwick Business School, said the planned cost cuts appeared meagre and left room for a rival bidder to offer more to LSE shareholders.

“’Mergers of equals’ usually result in a lack of clarity in direction and leadership as both camps jockey for influence. A result is a confused structure and a failure to drive cost savings opportunities arising from the merger.

“The most likely intervention will come from the US network of exchanges and clearing houses, Intercontinental Exchange, led by founder and president Jeffrey Sprecher. The current approach of the LSE and Deutsche Börse may not be aggressive enough to see off Sprecher’s unwanted attention.”

Under UK takeover rules, Deutsche Börse cannot ask LSE for a break fee if the deal fails, leaving greater room for a rival offer. Fees are sometimes payable by a company if it withdraws a bid but the merger structure of the deal means no such “reverse break fee” is possible.

Facebook Twitter Pinterest Carsten Kengeter, Deutsche Börse chief: ‘What we have here is an agreed merger of equals.’ Photograph: Kai Pfaffenbach/Reuters

The deal is going forward under the shadow of the British referendum on EU membership on 23 June. Kengeter said a vote for Britain to leave the union could affect some transaction volumes but that “the overall proposition is not endangered at all”.

Xavier Rolet, LSE’s chief executive, said: “This is not conditional on the outcome of the referendum. We simply do not know [and] we will simply have to take a look. No one knows, if the outcome was an exit, what the consequences would be.”

The Frankfurt-based exchange will buy LSE through a new company called UK TopCo, which will pay tax in the UK but will be listed in London and Frankfurt. Deutsche Börse and LSE will be subsidiaries of the new company, which will combine LSE’s share trading operations with Deutsche Börse’s strong derivatives dealing business.

With concerns in the UK and Germany about their national exchange being subsumed by that of the other country, Kengeter said bosses had not yet decided on what the new company would be called. “Unfortunately, no, we don’t have a name yet. We will take it step by step. We need a name of course before completion but that is going to take a while so it’s still early days.”

The LSE chairman, Donald Brydon, will chair the board and Kengeter will have the same job after the takeover. Rolet will step down but he will work as an adviser to the chairman and deputy chairman, Deutsche Börse’s Joachim Faber, for up to a year.

Brydon said the board had not decided how much Rolet, who was paid £6.4m for 2014, would receive as a pay-off or for his advisory role.