Market - - Jan 03,2017
Euronext, the owner of four of Europe’s biggest stock exchanges, has announced a 510 million euro ($532 million) deal to buy London Stock Exchange Group’s (LSE) French clearing business.
LSE along with London City Equity Limited (LCE) issued a statement saying that they have agreed on terms with Euronext’s all cash offer. Euronext owns the main Paris, Portuguese and Belgian stock exchanges and its shareholders will vote on the deal of a remarkable general meeting in the first quarter of this year.
The deal has also cleared the way for LSE’s proposal of $28 billion mergers with Deutsche Boerse.
In December, the three companies had revealed that they were in talks over the sale of French clearing subsidiary of LCH. Analysts call it an attractive deal as LCH generated net profits of 36 billion euros in 2015, with net assets of 303 million euros. In the first half of 2016, gross income hit 69 million pounds, on net assets of 301 million pounds.
The European Commission (EC) had stated its objections over the proposed LSE and Deutsche Boerse’s merger in December.Its concerns were focused on the clearing of derivatives contracts and to address competition worries raised in the market.
Clearing is becoming a much more attractive business among major market investors as global reforms introduced after the 2007-09 financial crisis mean banks must clear the bulk of their derivatives trades to make them safer and more transparent. US companies including NASDAQ and CME Group were also rumored of keeping an eye on the deal.
Buying Clearnet would mean Euronext would not have to rely on its competitor's clearing services. Euronext said it expects the deal to add substantially to its earnings. The French firm had fixed the deal to buy synergies at 13 million euros before taxes.