LSE Chooses Euronext, Italian Banks for Milan Bourse Talks
LSE in Exclusive Talks With Euronext Over Italian Exchange Sale
(Bloomberg) -- London Stock Exchange Group Plc is in exclusive talks to sell Borsa Italiana to Euronext NV and two Italian institutions, as the government in Rome moves closer to repatriating ownership of its main equity-trading venue.
LSE, which is selling Borsa Italiana to get approval for its $27 billion Refinitiv deal, said in a statement it chose the group for talks over rival bidders that included Deutsche Boerse AG and SIX Group AG. The bids reportedly value the Italian exchange at 3.5 billion euros ($4.1 billion) to 4 billon euros.
Adding Borsa Italiana would give Euronext about a quarter of all equity trading in Europe and mean that 28 of of the Euro Stoxx 50 companies are listed on its markets.
Borsa Italiana is seen as a strategic asset in Italy because of its ownership of MTS SpA, a platform used to trade government bonds, and the Italian government has sought to engineer a deal for months. Euronext, the owner of the Paris and Amsterdam exchanges, is bidding with Cassa Depositi e Prestiti SpA, a state-backed lender, and Intesa Sanpaolo SpA, Italy’s biggest bank -- and those institutions would take stakes in Euronext.
“One of the compelling features of this transaction is that we are not testing, creating and inventing new things but fitting it into an existing model that has been proved by 20 years of development,” Euronext Chief Executive Officer Stephane Boujnah said in a telephone interview.
Federal Model
Originating in a merger between the Paris and Amsterdam exchanges, Euronext has grown under acquisitive Boujnah’s federal model to absorb equity markets in six countries amid a wave of exchange consolidation globally.
He said owning Borsa Italiana would mean Euronext would get more than a third of its revenue in Italy, surpassing France. The deal gives Euronext a clearinghouse for the first time as well as a securities depository, stock exchange and bond platform.
Boujnah has eyed a transformational tie-up in recent years. He missed out on Spanish exchange BME earlier this year, losing out to SIX. This time he’s beaten out both the Swiss firm and Deutsche Boerse. The German exchange operator said in a statement that its offer focused on a “high degree of autonomy” for the Italian stock exchange, rather than the involvement of Italian partners at a group level.
Euronext’s offer was the highest on the table, according to two people familiar with the talks who asked not to be named discussing private information. LSE declined to comment.
Equity Stakes
Boujnah confirmed that Italy’s state lender CDP would own about 8% of Euronext, while Intesa Sanpaolo will own a similar stake to BNP Paribas’ 2% holding.
Euronext shares rose 4.3%, while LSE shares gained 1.3% on Friday. Both companies noted in their statements that the talks may not lead to a transaction.
The Italian government imposed another hurdle on the bid process last month when it gave its market regulator the power to veto purchases of large stakes in Borsa Italiana, depending on the “financial solidity” of an acquirer.
Central functions of the new group would be based in Milan and Rome, according to Euronext’s statement.
The deal would see CDP take a seat on Euronext’s supervisory board while a second Italian candidate would become chiarman of the combined group, the statement said. Consob and Banca d’Italia will continue to supervise Borsa Italiana’s activities.
The potential transaction would be financed through a mix of available cash, new debt and new equity in the form of a reserved capital increase to CDP and Intesa Sanpaolo and a rights issue to Euronext’s shareholders. JPMorgan Chase and Mediobanca advised Euronext. Lazard advised CDP on the deal.
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