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Deutsche Börse investors take aim at chief over failed LSE deal

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Deutsche Börse investors take aim at chief over failed LSE deal

Leadership accused of not assessing Brexit risks when designing exchanges merger

Carsten Kengeter at Deutsche Börse’s annual press conference in Frankfurt © AP

Carsten Kengeter, Deutsche Börse’s chief executive, came under fire from investors over its failed merger with the London Stock Exchange Group at the German exchange operator’s annual meeting on Wednesday.

Deutsche Börse’s third attempt in 17 years to merge with its British rival collapsed earlier this year after the LSE rejected concessions demanded by the EU Commission without warning or consulting its German partner.

But the merger’s future had been in doubt since the UK voted last year to withdraw from the EU, raising questions about whether the two groups’ intention to locate the holding company of their merged group in London — and therefore outside the future EU — was still tenable. Last month the exchange conceded the aborted tie-up had cost it €76.5m.

At the annual meeting in Frankfurt, shareholders controlling just over 16 per cent of the capital represented refused to give their seal of approval to the performance of Mr Kengeter in 2016. Other management board members faced similar levels of protest.

How blue-eyed does one have to be to believe that the German exchanges regulator would, in the case of Brexit, allow a headquarters located outside the EU?

Andreas Lang, representative of the DSW shareholder association

Under the German corporate code, a vote to “discharge” the board of a company is deemed a vote of confidence in its management and policies. A vote against discharge is the strongest way shareholders can express displeasure at an AGM.

Andreas Lang, a representative of the DSW shareholder association, said Deutsche Börse’s leadership had failed to take into account the risks that Brexit could pose when designing the deal, which was announced three months before the UK vote.

“How blue-eyed does one have to be to believe that the German exchanges regulator would, in the case of Brexit, allow a headquarters located outside the EU?” he asked.

“How much of a dilettante does one have to be, to believe that in the case of Brexit it would be possible, if necessary, to renegotiate key points of the agreement? What a technical error! And how embarrassing is it, when as a highly paid manager, one has to accept charges of naivety from politicians?”

Martin Weimann, from the VzfK shareholder association, said Deutsche Börse had not spent enough time convincing politicians in Hessen, the German state where Deutsche Börse is based, of the merits of the deal, and had instead focused too much on federal politicians in the German capital Berlin.

“One can make mistakes, no question. But when you make the same mistake again and again, then it is either the expression of narrow-mindedness or stupidity,” he said. “Lessons have to be learnt here, in particular by Mr Kengeter and [Deutsche Börse chairman Joachim] Faber. In my opinion, we need a fresh start in personnel terms.”

Mr Faber said he regretted the LSE’s decision “not to take the final step” and meet the EU’s demands but backed Mr Kengeter, who is being investigated by German prosecutors over potential insider trading.

Mr Kengeter said he was “certain” the allegations would turn out to be “unfounded”. “Insider trading goes against everything I stand for,” he said.

Mr Kengeter said Deutsche Börse was now focusing on a standalone strategy and that bigger mergers were unlikely. Future deals and investments would likely focus on data and other asset classes, such as foreign exchange trading.

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