Boerse buys Clearstream

February 1, 2002 Posted: 0923 GMT

LONDON (CNN) -- Deutsche Boerse has agreed to buy the half of Clearstream it does not already own, valuing the securities settlement house at 3.2 billion euros ($2.8 billion).

But the German stock exchange's deal has already prompted Clearstream's biggest customers to consider moving their businesses to rival Euroclear.

The banks argue that clearing houses, which settle bond and stock trading transactions, still need to consolidate to cut cross-border trading costsbut should not merge with exchanges.

UBS, Switzerland's biggget bank and ClearStream's biggest customer, has said it may consider shifting its business elsewhere, while J.P. Morgan Chase has already moved some of its transactions.

The operator of the German stock exchange said on Friday the board of Cedel, the group of 90 banks that own half of Luxembourg-based Clearstream, stands to receive 1.6 billion in cash or its shares if the deal wins two-thirds approval from shareholders.

Clearstream is Deutsche Boerse's biggest acquisition to date since the operator of the Frankfurt Exchange went public in early 2001, raising 1.25 billion in the process.

The deal gives Deutsche Boerse complete control of a business which already generates about a quarter of the exchange's core earnings, according to Reuters.

Deutsche Boerse said the deal would add about 50 percent to cash flow in the first full year after the deal but would be marginally dilutive to net earnings.

"The acquisition of the remainder of the remainder of Clearstream confirms Deutsche Boerse's position as the preeminent one-stop handling agent for the securities processing chain," Deutsche Boerse said in a statement.