The london stock exchange group is closing in on a 4bn deal to sell the milan stock exchange to rival euronext, a move the uk group hopes would persuade eu competition regulators to approve its $27bn acquisition of data and trading group refinitiv.
An announcement on the sale of borsa italiana, the majority owner of one of europes largest sovereign bond trading platforms, could come as soon as friday morning following a meeting of the lse board, according to two people familiar with the matter.
The two companies began exclusive discussions three weeks ago after the lse chose to pursue an offer from euronext ahead of rival bids for the milanese bourse from germanys deutsche brse and switzerlands six group.
David schwimmer, chief executive of the lse, put the groups prized italian assets up for sale in an effort to persuade authorities in brussels to sanction its purchase of refinitiv. the deal will turn the lse into one of the worlds biggest operators of capital markets infrastructure, controlling major exchanges, clearing houses, data and indices.
However, competition regulators in brussels have raised concerns that a tie-up could curb competition in fixed income trading. borsa italiana is the majority owner of mts, a major bond trading venue. the european commissions review of the refinitiv deal is set to be published by mid-december.
For euronext, taking control of borsa italiana would cement its position as one of the most important operators of market infrastructure in the eu. the group already owns the main stock exchanges of paris, amsterdam, dublin, oslo, lisbon and brussels. if the sale goes through, companies with a collective market capitalisation of more than 5tn would be listed on euronext, while its venues would be home to a quarter of europes 30bn-a-day trading in equities.
The lse and euronext declined to comment.
Buying a historic cash equity exchange in europe is a very specific exercise in political manoeuvring, said mark yockey, portfolio manager at artisan partners, whose fund manages more than $2.5bn in investments.
Over the last 15 years, euronext has become the consolidator of choice for these traditional local cash equity exchanges. they developed political connections, a unique skill set and specific processes.
The sale of borsa italiana and mts, which the lse acquired for 1.6bn in 2007, has proved politically sensitive in italy, where the government regards them as key national assets. alongside the main stock exchange and mts, borsa italiana owns a clearing and a settlement house.
To address that, euronext submitted a joint bid with italian bank intesa sanpaolo and state-owned investor cassa depositi e prestiti, under which cdp would take an 8 per cent stake in euronext. as part of the deal, regulatory oversight of borsa italiana will remain in italy and an italian will chair the group.
Euronext is expected to finance the deal through a mix of existing cash, new debt, a rights issue to existing shareholders and new equity issued to cdp and intesa.
Additional reporting by arash massoudi