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Press releases 2000

17 July 2000

Outline of iX-international exchanges strategy and merger benefits;
International group of key market users to advise board;
Board members nominated.

London Stock Exchange and Deutsche Brse have today published the Information Documents which provide shareholders with details of the proposed merger to create iX-international exchanges.

The documents outline the goals and strategy of the new company, benefits of the merger for shareholders and customers, as well as the technology to be used. Shareholders will vote on the proposed merger on 14 September at extraordinary general meetings of the London Stock Exchange and Deutsche Brse.

Commenting, Don Cruickshank, chairman designate of iX-international exchanges, said: "The critical mass and significant synergies created by this merger will bring lower dealing costs, better prices and unprecedented access to a wide range of international investment opportunities and markets. iX-international exchanges will be Europe's largest equities market and the world's leading derivatives exchange, with the financial strength to develop a substantial information and e-commerce business.

"We believe that iX-international exchanges will provide benefits to all market users and the board firmly recommends this merger to our shareholders."

Werner Seifert, chief executive-designate of iX-international exchanges, said: "Bringing together the two leading stock exchanges in Europe is an important step in enhancing the efficiency of European capital markets. Both boards believe that it will benefit investors, issuers, intermediaries and thus shareholders."

Goals and strategy

London Stock Exchange and Deutsche Brse intend that iX-international exchanges should become the leading global exchange organisation, providing services at lowest costs and creating significant benefits for its customers and value for its shareholders. iX-international exchanges will offer a broad range of services, including trading and information products for equities and derivatives, exchange systems technology and new e-commerce initiatives.

Consultation

Before making substantial changes to market structures or services, iX-international exchanges will seek input from a broad range of market users, including private client brokers, dealers, investors and issuers. iX-international exchanges will establish a new Senior Market Advisory Group to provide practitioner input to the board.

Benefits

Benefits for both customers and shareholders will result from the critical mass that will be created by combining markets and by the economic effects of creating a single electronic trading platform and rationalised infrastructure.

- Private client brokers and other intermediaries will benefit from the lower charges derived from economies of scale, as well as easier access to a broad range of products and services. iX-international exchanges will support initiatives to link the single electronic trading system to one central counterparty.

- Investors will benefit from lower transaction and dealing costs as a result of cost synergies primarily achieved in the areas of technology and systems. Increased liquidity is expected to lead to narrower bid-offer spreads and thus more competitive pricing.
- Companies will benefit from the concentration of investor focus and access to a deeper pool of capital.

- Shareholders are expected to benefit from operating cost synergies of approximately 50 million per annum from the year commencing 1 January 2002. iX-international exchanges will be managed with the objective of maximising shareholder value.

Markets

In addition to its existing markets, iX-international exchanges will develop a pan-European blue-chip market under the UK regulatory regime and a pan-European high-growth market under the German regulatory regime. Companies will be able to use their home country listing when admitted to trading on iX-international exchanges' new markets.

Indices

Existing indices such as the FTSE 100 or DAX will continue to exist. While they are defined by the country of their constituents, iX -international exchanges intends to ensure the market has a single pan-European index family, as well as derivative products based on these indices.

Nasdaq

The Merger Partners' ultimate aim is to form a long-term, substantive relationship on a global basis with Nasdaq. Work is currently in hand on a joint venture agreement to provide an intermediate step towards achieving the shared global vision. The parties also intend to take substantial cross-shareholdings in each other and will work together thereafter to explore a full merger of interests to create a global exchange.

Milan and Madrid

The stock exchanges of Milan and Madrid have indicated that they will negotiate with iX-international exchanges to become part of the group following the merger.

Technology

Technology for iX-international exchanges will be provided by Deutsche Brse's existing IT subsidiary Deutsche Brse Systems. iX-international exchanges is committed to the development of an upgraded trading platform, based on Xetra technology, which will accommodate the functionality of all iX-international exchanges' markets on one platform. The migration of all trading to this platform should be completed by December 2001.

To reduce the impact on customers of the migration to the unified trading platform, iX-international exchanges will offer extensive assistance to its customers including, for example, the provision of optional 'starter kits'. iX-international exchanges will set aside a sum of 8 million to be used to make a cash payment of approximately 30,000 to each existing customer of the London Stock Exchange's trading services as a contribution to the cost of migrating from the existing infrastructure.

Board

The board of iX-international exchanges will initially comprise the chairman, deputy chairman, chief executive, two executive and five additional non-executive directors. The London Stock Exchange and Deutsche Brse have each initially nominated five directors onto the board. In addition, the merger partners have agreed that two further non-executive directors, independent of both the London Stock Exchange and Deutsche Brse, will be appointed in due course.

The board will consist of:

Don Cruickshank (chairman); Rolf-E. Breuer (non-executive deputy chairman); Werner Seifert (chief executive); Martin Wheatley (deputy to chief executive); Jonathan Howell (finance director). Non-executive directors: Uwe E. Flach; Michael Marks; Friedrich von Metzler; Ian Salter; Manfred Zass.

Timetable

Over the next few weeks there will be a series of visits with shareholders and customers of the London Stock Exchange and Deutsche Brse.

Extraordinary General Meetings will be held on 14 September in London and Frankfurt at which shareholders will vote on the merger proposal.

For shareholders in the London Stock Exchange, an off-market matched bargain dealing facility in the Exchange's shares will be offered by Cazenove & Co from 24 July 2000.

-ends-

Note to editors: Details of this merger, which is subject to shareholder and regulatory approvals, are contained in the Information Documents. The above is a summary of the documents, which can be accessed on the websites of the two exchanges: