(Bloomberg) -- Euronext NV is open to a wide variety of acquisitions as part of a new strategic plan for the next three years that also revealed a buildout of the exchange’s in-house European Union clearing operations.
The Paris-listed firm will consider deals that would bolster its footprint in Europe, Chief Executive Officer Stephane Boujnah said in an interview Monday. That includes a transformational purchase similar to Euronext’s deal for Borsa Italiana.
“We have to be patient and ready to react, as we have done with Borsa Italiana,” Boujnah said on the sidelines of Euronext’s investor day.
The firm will also look at bolt-on acquisitions that would diversify its revenue mix. There are “a large number of potential targets in post-trade, in forex, in advanced data services, in corporate services, and these assets don’t necessarily need to be based in Europe, they can also be based in the U.S,” Boujnah said.
Euronext’s new strategic plan targets a compounded annual growth of its overall revenue between 3% and 4% from 2020 to 2024, accelerating from a previous 2%-to-3% target for 2018 to 2022, the company said in a statement Monday. The plan, called “Growth for Impact 2024,” calls for the firm to expand its clearing offering.
Euronext acquired CC&G, a multi-asset clearinghouse, as part of its purchase of Borsa Italiana from the London Stock Exchange Group Plc earlier this year. It plans to expand its operations to directly manage the clearing of cash and derivatives flows.
Long-Term Arrangement
Since 2003, Euronext has relied on LCH SA, LSEG’s Paris-headquartered clearinghouse, to clear most of its cash and derivatives trading flows. Euronext said it will pay a break fee to end that arrangement -- which runs through to 2027 -- early.
LSEG said in a statement Monday the “total potential impact” of the changes is less than about 1% of total group revenue. The earliest effective termination date for financial and commodities derivatives clearing is January 2024, LSEG said, while the provision of cash equities clearing services is subject to a 12-month notice period.
Originating in a merger between the Paris and Amsterdam exchanges, Euronext has completed a number of deals under Boujnah to now encompass stock exchanges in seven countries amid a wave of exchange consolidation globally. With the acquisition of Borsa Italiana this year, the firm now generates a third of its revenue from Italy.
The deal, which was initially expected to generate 60 million euros ($70 million) in synergies, is now expected to produce savings of as much as 100 million euros because of the plans to expand the group’s clearing operations. Euronext estimated the deal’s implementation costs at 160 million euros.
Euronext also said it will maintain capital expenditure at between 3% to 5% of revenues, and is targeting 5%-to-6% annual growth in EBITDA, a measure of earnings, through 2024. The firm also plans to keep dividend payouts at half of reported net income.
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