In a response to market speculation, and an earlier rise in its share price, the LSE told investors that the potential transaction would be an all-share merger of equals, into a new holdings company.
Detailed discussions are ongoing between the stock exchange operators.
LSE added that it is envisaged that its current shareholders would potentially receive 0.441 shares in the new company for every LSE share they own.
That would see LSE’s current shareholders own 45.6% of the new company, with Deutsche Boerse shareholders owning the other 54.4%.
“The boards believe that the potential merger would represent a compelling opportunity for both companies to strengthen each other in an industry-defining combination, creating a leading European-based global markets infrastructure group,” the LSE said in a statement.
It added that there was currently no certainty that any transaction will occur, and said a formal announcement of a merger would depend upon the two companies agreeing to terms and conditions and customary due diligence.