Italian Exchange Seen as Next Target in Battle of the Bourses
Italian Exchange Seen as Next Target in Battle of the Bourses
(Bloomberg) -- Italy’s national stock market could find itself at the center of a multibillion-euro bidding war if its owner, the London Stock Exchange Group Plc, is forced to sell it to push through a landmark takeover of data provider Refinitiv.
European authorities on Monday decided to launch a full antitrust review of the $27 billion LSE-Refinitiv deal, flagging competition concerns around businesses including data and government bond trading. It raises the prospect of the LSE needing to dispose of certain assets in order to appease regulators.
Rival European exchanges are already interested in one of these assets: Borsa Italiana SpA, according to people familiar with the matter. The Milan-based exchange could draw bids of about 3 billion euros ($3.4 billion) to 3.5 billion euros if it’s put up for sale, said the people, who asked not to be identified as discussions are private.
The LSE has owned Borsa Italiana since 2007 and wants to keep it. The Italian operations generated 14% of all LSE revenue last year, according to Bloomberg data, and allow the U.K. group to keep a foothold in the European Union.
“I would have thought the LSE would want to hang onto it in a post-Brexit world,” said Niki Beattie, founder of Market Structure Partners.
Still, the LSE could have its hand forced. Borsa Italiana is the majority owner of fixed income platform MTS SpA, which will come under the same roof as Refinitiv-backed bond venue Tradeweb Markets if the deal goes through -- creating a dominant player in European government debt trading.
The EU often demands the sale of overlapping businesses to prevent a merged entity from becoming too powerful and has been unafraid of wielding its ultimate threat to veto deals. It was the LSE’s unwillingness to sell MTS that scuppered its transformative merger with Germany’s Deutsche Boerse AG in 2017.
The European Commission has set a deadline of Oct. 27 to rule on LSE-Refinitiv. A representative for the LSE declined to comment.
Italy Foothold
Consolidation among European exchanges has been rife for years. Deutsche Boerse remains on the lookout for larger deal opportunities following the collapse of its LSE tie-up, while Euronext NV has been growing aggressively under acquisitive Chief Executive Officer Stephane Boujnah.
Euronext is interested in acquiring Borsa Italiana, one of the people said. The operator of multiple single-country exchanges in Europe is keen to add to its stable, having recently missed out on Spain’s Bolsas y Mercados Espanoles SHMSF SA. Boujnah declined to comment on Borsa Italiana on a media call this month, saying the LSE had made it clear it didn’t want to sell.
For Deutsche Boerse, a move for Borsa Italiana would give it a chance to deploy the 2 billion euros of excess cash it has earmarked for mergers and acquisitions. The exchange will look at a possible bid for the Italian group if it’s put on the block, according to one person.
“Deutsche Boerse and Euronext would be interested as both need M&A to lift revenue growth and could benefit from cost synergies,” said Bloomberg Intelligence analyst Lento Tang. “Euronext is likely to be more keen as it could strengthen its Italy foothold, in line with its pan-European federal business model.”
Representatives for Deutsche Boerse and Euronext declined to comment.
Rome Interest
Both could face competition from Rome. Italy’s coalition government is uncomfortable that national assets like Borsa Italiana and MTS are owned by the LSE, a non-EU entity, and has taken advice from Mediobanca SpA on the matter, one of the people said.
“We consider Borsa Italiana a strategic asset with a great potential, so we are closely following the issue,” Italian Finance Minister Roberto Gualtieri said at a press conference this month.
Representatives for Mediobanca and the Italian finance ministry declined to comment. A spokesperson for the office of Italian Prime Minister Giuseppe Conte didn’t immediately respond to a request for comment.
“If Borsa Italiana were to leave LSE Group, I don’t think that would be a good thing for Italian financial markets in the long run,” Xavier Rolet, former LSE CEO, told Bloomberg TV earlier in June.
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