Rebel fund TCI expects £15bn Stock Exchange bid

The hedge fund which laid siege to the London Stock Exchange’s boardroom last year has stoked expectations of a £15bn takeover bid for the company from a transatlantic rival.

Sky News has learnt that Sir Christopher Hohn, who runs The Children’s Investment Fund Management (TCI), told investors last week that consolidation in the exchanges sector was inevitable.

Sources familiar with Sir Christopher’s remarks said he predicted that a takeover bid from either CME Group, which owns the Chicago Mercantile Exchange, or the New York Stock Exchange’s parent, Intercontinental Exchange (ICE), was increasingly likely for all or part of the LSE’s business.
The LSE Group has a market value of just over £13bn, meaning that with a typical takeover premium attached, any deal involving the entire company could value it at £15bn or more.
Sir Christopher is understood to have said that the LSE Group’s strength in clearing services should be replicated in foreign exchange activities, further entrenching the company’s position.
The LSE’s clearing house, LCH Clearnet, dominates the market for euro clearing, and draws regular interest from rival exchange owners.
His remarks to TCI investors were the first he has made on the LSE’s prospects since his assault on the company’s chairman, Donald Brydon, ended in defeat last month.
The comments were significant because Sir Christopher has close ties to Jeff Sprecher, ICE’s chairman and chief executive.
ICE has frequently been tipped as a likely suitor for the London bourse’s parent company.
Sources said Sir Christopher also disclosed that he had recently met Mark Carney, the Bank of England Governor, who had offered reassurance that the City’s dominant role in the lucrative euro clearing market would not be damaged by Brexit.
An insider said Sir Christopher’s meeting with Mr Carney had been attended by a larger group of investment management industry figures.

Image: The position of former LSE chief executive Xavier Rolet was the issue at the heart of the boardroom wrangle
TCI, which holds a 5.13% stake in the LSE Group, was furious at its board’s decision to replace Xavier Rolet, the chief executive who had transformed the company’s performance and value during a decade at the helm.

Mr Rolet had been widely lauded for his transformation of the business into a key pillar of global markets infrastructure.
Sir Christopher led a voluble campaign against Mr Brydon, winning support from just over 20% of voting shareholders to oust the chairman at an extraordinary general meeting last month.
TCI’s efforts were undermined by Mr Carney, who made a rare public intervention into the row by effectively backing the board’s position.
Mr Brydon, who is due to step down next year, is now engaged in the search for Mr Rolet’s successor as chief executive.
He wrote to Sir Christopher to offer an olive branch within minutes of the EGM, but received a stinging response accusing him of presiding over “a major corporate governance failure”.
Many investors expect TCI to renew its crusade against Mr Brydon ahead of the LSE Group’s annual meeting in the spring.
The row sparked by Mr Rolet’s “retirement” stunned the City because he had planned to leave in any case if a merger between the LSE and Germany’s Deutsche Boerse – which was ultimately blocked by regulators last year – had been completed.
TCI, which produced a market-leading 28.2% return last year, had originally sought Mr Rolet’s reinstatement, but Mr Carney’s remark that “all good things come to an end” led the former LSE Group boss to declare that he would not return “under any circumstances”.
David Warren, the LSEG’s chief financial officer, has taken over as interim chief executive following Mr Rolet’s sudden exit.