LSE had doubts over Deutsche Boerse CEO leading merged firm - sources

By Andreas Kröner

FRANKFURT (Reuters) - The London Stock Exchange (LSE) had doubts about the suitability of Deutsche Boerse CEO Carsten Kengeter to lead a combined company after insider trading allegations were made against him, two sources familiar with the matter said on Monday.

LSE (LSE.L) Chairman Donald Brydon wrote an email to Deutsche Boerse (DB1Gn.DE) Chairman Joachim Faber to express his concerns in early February, shortly after prosecutors searched Kengeter's apartment in connection with suspected insider trading, the sources said, adding they had seen the email.

Kengeter has said the allegations made against him are unfounded.

Some people familiar with the matter said the LSE's doubts over Kengeter played a role in its decision to scupper a merger with Deutsche Boerse (DB11.DE). The LSE decided late on Sunday not to sell its stake in Italian trading platform MTS, a step that all but ended a planned tie-up.

Other sources, however, said the LSE's reluctance to discuss moving the headquarters of the merged company to Frankfurt from London in the wake of Britain's vote to leave the European Union was a more important consideration.

Deutsche Boerse, Kengeter and the LSE declined to comment.

In his email, the LSE's chairman said advisers had told him they were no longer sure whether Kengeter was the right person to take over as chief executive following a merger, the sources said.

Faber replied to Brydon by defending Kengeter, saying the presumption of innocence must prevail, the sources added.

On Feb. 7, Deutsche Boerse publicly backed Kengeter as prosecutors investigated whether secret merger talks with the LSE were under way when Kengeter bought shares in his company in December 2015.

(Additional reporting by Arno Schuetze; Editing by Mark Potter)