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Euronext, SIX Group launch battle for Madrid bourse

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By Reuters
Euronext, SIX Group launch battle for Madrid bourse
FILE PHOTO: he logo of stock market operator Euronext is seen on a building in the financial district of la Defense in Courbevoie, near Paris, France, May 14, 2018. REUTERS/Charles Platiau   -   Copyright  Charles Platiau(Reuters)

By Sudip Kar-Gupta and John Revill

PARIS/ZURICH (Reuters) – Pan-European stock market operator Euronext <ENX.PA> and Switzerland’s SIX sparked a bidding war for Spain’s BME <BME.MC> on Monday, with both trying to snap up one of Europe’s last standalone stock exchanges.

The Spanish bourse, whose shares jumped by more than a third in early trading, said the Swiss offer “reasonably reflected” its current value.

With European sector leaders Deutsche Boerse <DB1Gn.DE> and London Stock Exchange <LSE.L> effectively too big to consolidate without raising serious competition concerns, exchange mergers are focusing on smaller players, with Euronext having already scooped up the Dublin and Oslo exchanges.

SIX has offered to buy BME for 34 euros per share, implying a total equity value of 2.843 billion euros (£2.4 billion), a hefty premium over BME’s market capitalisation of just over 2 billion euros before the offer was announced.

The deal was “very much” about growing the revenues of both businesses, SIX Chief Executive Jos Dijsselhof told reporters on Monday.

Shares of BME, among the smallest of Europe’s exchanges, were up 37% at 34.8 euros by 1040 GMT.

We believe the terms of the offer to be difficult to refuse,” analysts at Spanish bank BBVA said.

Euronext, which has a market cap of around 5 billion euros, had denied earlier this month that it was bidding for BME. It has not disclosed an offer price. Taking over BME would not dramatically alter the overall exchange landscape, but would help to buttress SIX or Euronext.

Euronext is a minnow compared to LSE <LSE.L> and Deutsche Bourse <DB1Gn.DE> which both have market capitalisations of well over 20 billion euros.

But it has gradually built up scale in share trading, and now operates exchanges in Norway, Netherlands, Belgium, Portugal, France and Ireland, with Spain an obvious gap.

Euronext shares were up 1.5% at 72.95 euros.

SIX is focused on Switzerland and buying BME would give it a base inside the European Union. That would help Switzerland regain direct access to the EU after Brussels blocked EU-based investors from trading on Swiss exchanges from July this year as a row escalated over a stalled bilateral treaty.

SIX, whose offer for BME is a friendly one, said its proposed purchase would be financed through a combination of existing cash resources and access to capital markets.

Madrid’s government would likely need reassurances that jobs would not be lost in Spain if trading in Spanish shares migrated to a central platform run by SIX or Euronext.

BME said it would keep its current business activities, Spanish headquarters and local strategy for a four-year transitional period at least.

(Writing by Richard Lough and Huw Jones; Editing by Louise Heavens, Kirsten Donovan)