The London Stock Exchange Group said late Sunday that European regulators were unlikely to approve its merger with Deutsche Börse, which would have created a European heavyweight in a rapidly consolidating industry.

Regulators at the European Commission conditioned its approval of the merger on the LSE’s sale of its majority stake in MTS - an electronic platform for trading European government bonds and other fixed income products. But that option was simply unpalatable.

The London exchange also said the remedy would “jeopardize” its relationships with Italian regulators and be detrimental to its businesses in Italy and the combined company if the merger were to be completed. The company operates the Borsa Italiana, in addition to the London Stock Exchange.

 “Taking all relevant factors into account and acting in the best interests of shareholders, the LSE board today concluded that it could not commit to the divestment of MTS. Based on the commission’s current position, LSE believes that the commission is unlikely to provide clearance for the merger.”

LONG SOUGHT-AFTER MERGER.    The London Stock Exchange and Deutsche Börse had hoped to create a potential European champion by combining stock exchanges in Britain, Germany and Italy, as well as several of Europe’s largest clearinghouses. The combined company would have been Europe’s largest operator of stock markets by far.

The exchanges agreed in March to a merger, and shareholders from the 2 exchanges approved the deal in July. It was the companies’ 3rd attempt to come together since 2000.

The Intercontinental Exchange, the owner of the New York Stock Exchange, had been seen as a potential rival in the deal but opted in May not to pursue a counteroffer.