SOME of the biggest shareholders of Deutsche Börse are cautioning management not to overpay for London Stock Exchange (LSE) Group if a counteroffer emerges, according to people familiar with the matter.

Intercontinental Exchange is contemplating a bid for LSE, which last week agreed to a deal with Frankfurt-based Deutsche Börse. The German exchange would get 54% of the London-based company it wants to form with LSE.

The all-share transaction with Deutsche Börse values LSE’s equity at £8.9bn, according to data compiled by Bloomberg.

Some major shareholders of Deutsche Börse accept the logic of joining with LSE to create Europe’s largest exchange operator, but are concerned regulators will not approve the transaction, according to people familiar with the discussions who asked not to be named because the talks are private.

Meanwhile, some major LSE shareholders want Deutsche Börse to offer more, people familiar with the matter said last week.

"It’s natural for every shareholder, particularly institutional investors, who have a fiduciary responsibility to their investors, to try to get the best price," says Thomas Caldwell, CEO of Caldwell Securities, a money management firm in Toronto.

Spokesmen for Deutsche Börse and LSE declined to comment.

The challenge facing Deutsche Börse CEO Carsten Kengeter — who would run the combined company — is balancing demands of LSE shareholders seeking more money, while appearing prudent to his own investors.

LSE shares closed on Tuesday at 2,860p, or 12% higher than the value of Deutsche Börse’s offer, reflecting optimism that a sweeter bid will come in.

Investors have shot down deals in the past. Deutsche Börse tried to buy a smaller version of LSE in 2005, but it dropped its bid after shareholders, led by hedge funds, opposed the plan.

Deutsche Börse’s deal is funded solely with stock, mitigating issues with its credit rating.

In a bidding war, Mr Kengeter’s ability to sweeten the offer with debt will have to be judged against his desire to keep a higher credit rating. Deutsche Börse is rated AA by Standard & Poor’s, although a downgrade is being considered.

Mr Kengeter said last month that his "war chest is impaired a little". The exchange spent €725m buying a currency trading platform called 360T and €660m on indexing business Stoxx last year. On March 9, Deutsche Börse agreed to sell its US options exchange for $1.1bn in cash.

Intercontinental Exchange CEO Jeff Sprecher said last week that, as a publicly traded company, he had the ability to raise money.

"We have access to capital and an expectation by our investors and customers that we’re going to continue to evolve and grow and use those capital markets," he said.

Mr Sprecher’s company owns the New York Stock Exchange and several futures exchanges.

The takeover, or bid, premium in an acquisition was typically about 30%-%40% above the pre-bid share price, says John Colley, a professor at Warwick Business School. Deutsche Börse and LSE describe their deal as a merger of equals.

"It is an opportunity for Intercontinental Exchange," Prof Colley says. "If I were a shareholder in the LSE, I’d feel I was getting sold down the river a bit at the moment."

The head of LSE endorses the Deutsche Börse offer. "I 100% support this merger," the London bourse’s CEO Xavier Rolet says.

"I firmly believe it is the right deal for the shareholders, customers and employees of both LSE Group and Deutsche Börse.

"I also believe it is absolutely the right time to take this transformative step in histories."

Regulatory approval is also a worry for investors, because those discussions could mean months of uncertainty, potentially creating a downdraft for the companies’ share prices. Should officials block the deal, it would create strategic uncertainty as to how the companies would proceed.

Mr Rolet is set to step down from LSE if the company merges with Deutsche Börse, which raises questions about continued leadership if the deal fails.

"I think people are more open to it than they were in the previous attempts," Mr Caldwell says. "You just don’t know. That can delay it and that obviously represents a risk factor … an unquantifiable one."

Takeover attempts by the German exchange operator failed in 2000 and 2005.

Deutsche Börse’s attempt to buy NYSE Euronext was rejected by the European Commission in 2012.

Reto Francioni, who led the Frankfurt-based company at the time, called it a "black day for Europe".