In what appears to be a landmark trade deal, the London Stock Exchange (LSE) has agreed to a €4.3 billion ($5.1 billion) with Euronext to sell Borsa Italiana. This is according to insider sources from both firms.
If successful, the deal would bring LSE a step closer to clinching approval for its $27 billion purchase of Refinitiv, which is 45% owned by Thomas Reuters. The sale is aimed at dousing tensions amidst growing concerns over LSE control of the European Bond market.
This is corroborated in a statement by London Stock Exchange Chief Executive, David Schwimmer, “We believe the sale of the Borsa Italiana group will contribute significantly to addressing the EU’s competition concerns,”
Recall earlier that LSE had 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 presents an opportunity for Euronext to expand its equity operations, while it presents an opportunity for LSE to recoup the €1.6.
The deal will afford Euronext the opportunity to commence its first fixed income training via Borsa’s bond trading platform MTS.
Commenting on the deal, the CEO of Euronext, Stephane Boujnah said “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.”
How will the deal be funded?
Euronext with a market value of around 7 billion euros, might not be able to pull an outright cash deal without a sizeable amount of debt instruments. Hence, the firm plans to issue 1.8 billion euros in debt and raise 2.4 billion euros in new equity to fund it.
To raise funds and specifically secure the Italian government’s support, Euronext collaborated with state agency Cassa Depositi e Prestiti (CDP) and Italy’s biggest bank Intesa SanPaolo, who will subscribe to 700 million euros of Euronext’s equity issue.