What's going on?

You might remember that London Stock Exchange Group (LSE) and Germany�s Deutsche B�rse�AG agreed to a merger about six weeks ago. Investors thought that a rival bidder for LSE might emerge, but on Wednesday one of those potential rivals said it would not bid � and LSE�s stock price fell by 4%.

What does this mean?

LSE shareholders were probably hoping that a new potential buyer would offer a higher price for the company. But, Intercontinental Exchange Inc. (ICE) � the owner of the New York Stock Exchange � said it would not be bidding. Interestingly, ICE also claimed that LSE�s board didn�t sufficiently engage with it (which, if true, would reflect poorly on LSE�s board, which is supposed to try to maximize the value of their company). There is still a chance that another exchange group (perhaps�CME Group from Chicago) will bid for LSE, but Wednesday�s news eliminates what was perhaps the most likely challenger. It�s now more likely that the originally agreed deal will proceed.

Why should I care?

The bigger picture: Brexit could throw a spanner in the works. The deal could be imperilled if Britain votes to leave the European Union in its June 23rd referendum. That�s because German authorities are unlikely to approve plans for their main stock exchange to be controlled by an entity sitting outside the EU (i.e. in London). Shareholder votes are required to approve the deal – which could take place after the referendum so that the uncertainty of the referendum isn�t a factor.

For the stocks: Deutsche B�rse might be getting a pretty good deal. LSE shares declined, but Deutsche B�rse shares jumped about 6%. Part of that is relief that Deutsche B�rse is unlikely to be forced by a bidding war to pay a higher price, but it also suggests that investors think Deutsche B�rse is getting a pretty good deal. If LSE shareholders think that Deutsche B�rse is getting too good a deal and that LSE�s board hasn�t worked hard enough to get them a better deal, they�re going to be quite annoyed.