PARIS: Euronext is to buy Borsa Italiana from London Stock Exchange for 4.3 billion euros ($5.1 billion) in cash, the companies said on Friday, in a major expansion of the French operator’s network of European trading platforms.
LSE entered exclusive talks with Euronext last month after the Paris bourse owner saw off competition from Deutsche Boerse DB1Gn.DE and Swiss rival SIX.
The deal could bring LSE a step closer to winning approval for its $27 billion purchase of data provider Refinitiv, which is 45 per cent owned by Thomson Reuters, the parent company of Reuters News. LSE put Borsa up for sale to alleviate the European Commission’s concerns about its control over the European bond market. While LSE said it would have preferred to keep its Italian arm, it will bank a significant profit on the 1.6 billion euros it paid in 2007 when buying Borsa.
For Euronext, which operates bourses in Paris, Amsterdam and Dublin among others, the deal will bulk up its equity operations, with the combined group operating exchanges with more than 1,800 listed companies and an aggregate market value of around 4.4 trillion euros.
Borsa’s bond trading platform MTS will also give Euronext its first foray into fixed income trading.
“Euronext will significantly diversify its revenue mix and its geographical footprint by welcoming the market infrastructure of Italy, a G7 country and the third largest economy in Europe,” Euronext CEO Stephane Boujnah said in a statement.
According to Jeffries analysts, the deal values Borsa at 16.7 times 2019 EBITDA earnings before synergies versus the 15.5 times average for recent market infrastructure mergers and acquisitions “which we think looks reasonable as exchanges of this size and quality rarely come to market”.
However it will be a big deal for the French market operator, which has a market value of around 7 billion euros, to swallow. It plans to issue 1.8 billion euros in debt and raise 2.4 billion euros in new equity to fund it.
Its share price was down 3 per cent and LSE’s up 0.4 per cent by 0833 GMT.
“Overall, higher synergies coming at a higher price and a bigger rights issue than we expected,” Credit Suisse analysts said in a note.
Euronext said the transaction was expected to be immediately accretive to its adjusted earnings per share before synergies. Based on its 2019 financials, the combined group would have generated 1.3 billion euros in revenue. — Reuters
Oman Observer is now on the WhatsApp channel. Click here
