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% and LSE’s up 0.4% 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.

The sale of Borsa is politically sensitive in Italy due to its ownership of MTS, which handles trading of Italy’s 2.1 trillion euro ($2.5 trillion) government bond market.

To secure the Italian government’s backing, Euronext has teamed up 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.
The sale is contingent on the European Commission formally stating it will only approve LSE’s Refinitiv deal if all or part of Borsa Italiana is sold.

“We believe the sale of the Borsa Italiana group will contribute significantly to addressing the EU’s competition concerns,” LSE Chief Executive David Schwimmer said in a statement.

Goldman Sachs, Morgan Stanley and Barclays were among the advisors to LSE, Lazard advised CDP, while Mediobanca and JP Morgan helped Euronext.