Deutsche Boerse, the owner of the Frankfurt stock market, tonight agreed a $2.8 billion cash takeover of the New-York-based International Securities Exchange.

Deutsche Boerse said its Eurex subsidiary, jointly owned with Swiss Stock Exchange SWX, had signed an agreement with ISE's board to take it over for $67.50 a share.

The merger, subject to the approval of half of ISE's shareholders, will create the largest transatlantic derivatives marketplace and give Deutsche its long sought access to the fast-growing US derivatives market.

Deutsche Boerse added that cutting overlapping costs and cross selling products should allow it to save $50 million a year by 2012.

Deutsche Boerse is borrowing €1.5 billion of the cash needed through a bridging loan

Earlier in the day Deutsche Boerse chief executive Reto Francioni presented the plan to acquire the electronic trading platform at a supervisory board meeting. Deutsche Boerse.

The price is a near 50 per cent premium to ISE's closing price on Friday and analysts believe the price was set deliberately high to try to pre-empt a bidding war from rivals.

The Frankfurt bourse was forced to confirm its plans for a merger this morning after news leaked.

Minutes later the ISE confirmed that it was "in advanced discussions that could lead to a possible business combination with Eurex."

The International Securities Exchange was founded only seven years ago as a fully electronic platform, it is the largest option market in the US for individual stocks.

Deutsche lost out in the most recent round of stock exchange consolidation, when the New York Stock Exchange bought Euronext, the owner of the Brussels, Amsterdam and Paris stock exchanges.

It had hoped to do its own merger with Euronext and before that had made several approaches to the London Stock Exchange.

Its latest move highlights the central part derivatives exchanges are now playing in the acquisition plans of bourses.

NYSE Euronext, which owns the successful London-headquartered Liffe market, has said that derivatives markets in the US would be central to the next phase of its growth strategy.

The Chicago Board of Trade was under offer by its former enemy, the Chicago Mercantile Exchange, until the upstart derivatives exchange ICE launched a counter-bid earlier this year.

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