Should Cedel shareholders accept the offer, Deutsche Börse will own 100 percent of Clearstream and would in due course liquidate Cedel. The offer will value Clearstream at euro 3.2 billion (2.76 billion US Dollar). Cedel shareholders will thus receive euro 1.6 billion plus an amount representing the net asset value of Cedel's other assets, estimated at no less than euro 150 million. Shareholders of Cedel will have the choice to receive either cash or shares in Deutsche Börse, subject to an overall limit on the number of new Deutsche Börse shares to be issued.
The acquisition of the remainder of Clearstream confirms Deutsche Börse's position as the preeminent one-stop handling agent for the securities processing chain. The company will provide services and products throughout the securities industry beginning with trading and information products all the way through clearing and settlement. Increasing the level of integration will result in new product and service offerings at a faster rate thus creating value for the customers and shareholders alike.
The combined entity will introduce a system of straight-through-processing and interoperability standards to European capital markets, open at each stage of the securities processing chain.
The euro 3.2 billion valuation for Clearstream represents an expected multiple of approximately 20 times Clearstream´s expected net earnings in 2002, before synergies and restructuring charges. The offer is expected to be initiated no later than 28 February, 2002 and will extend for six weeks. The transaction is expected to be approximately 50 percent accretive to Deutsche Börse's cash flow per share in the first full year of Deutsche Börse's ownership and to be only marginally dilutive to its IAS net earnings. Deutsche Börse expects to achieve significant long term annual cost synergies in the areas of improved operational efficiency, coordination of IT project development and spending and other administrative costs. Immediate efforts to achieve synergies will focus on the reduction of external consultants and natural attrition. There are no plans for any compulsory staff reductions. In the longer term Deutsche Börse expects that the number of employees at Clearstream in Luxembourg will increase due to the anticipated growth of Clearstream.
Deutsche Börse is committed to support Luxembourg as a financial center and Luxembourg will remain Clearstream's headquarters location as well as the primary location for Clearstream´s operations. The construction and relocation to Clearstream´s new headquarters building will continue as planned.
The management of Deutsche Börse and Clearstream will be integrated in a combined management team. André Roelants will remain CEO of Clearstream and will also join the Management Board of Deutsche Börse as its deputy CEO. A further member of Clearstream's Group Executive Management will also be appointed to Deutsche Börse's Management Board. Robert Douglass will continue as chairman of Clearstream´s Board of Directors and it is anticipated that he will play a significant role in the new organisation. As soon as practicable, Deutsche Börse will recommend two new directors, to be agreed upon with Cedel and representing significant Clearstream customers, for election to Deutsche Börse's Supervisory Board.
Werner Seifert, CEO of Deutsche Börse, said: "When we announced the merger between Deutsche Börse Clearing and Cedel in 1999, we were on the threshold of creating something unique. Clearstream became the first clearinghouse of truly European scope. Today's transaction puts us on an equally exciting threshold. By seamless cooperation between all our businesses, we can create the most efficient, lowest cost securities processing chain. Our service levels will increase and we will accelerate the introduction of new products and services across all our businesses.
This is not the last step in the consolidation of European securities trading, clearing and settlement. Deutsche Börse is eager to consider cooperations, ventures, partnerships and acquisitions all along the chain: with other exchanges, CCPs, CSDs, ICSDs and even ventures with customers.
From its inception, Clearstream has recognized the importance of customer input and corporate governance structures that build confidence for our market participants. As consolidation accelerates through the European securities industry, Deutsche Börse will continue to respect the importance of market participants and will operate in a manner that gives them the loudest voice in determining the future direction of the market's development."
Robert Douglass, Chairman of Cedel, commented: "I am delighted that we have succeeded in striking a deal that is good for Cedel shareholders, for the customers of Clearstream, for its employees and for Luxembourg as a financial centre. It gives a proven management team greater opportunities to develop the business and pursue efficiency gains in what will continue to be an evolving and highly competitive European environment."
Clearstream CEO André Roelants added: "I have been strongly encouraged by the backing for this exciting, new stage in the development of Clearstream that has come from major users like Barclays, Citigroup and ING. This deal will enable Clearstream to extend its strong growth record and to make even bigger improvements to its highly competitive service offerings to the market. The quality and skills of our people are complementary to Deutsche Börse and will be very much needed to deliver the full benefits of this deal to our customers."
