Bolsas Y Mercados
A battle for the Madrid stock exchange erupted as Switzerland’s SIX Group AG announced a 2.8 billion-euro ($3.1 billion) takeover bid, minutes after Euronext NV confirmed its own interest.
SIX, which is owned by a group of Swiss banks, said Monday that its proposal for Bolsas y Mercados Espanoles SA would create the third-largest European operator of financial market infrastructure. Its all-cash offer — a third higher than BME’s closing price last week — won a positive nod from the target’s management.
That puts the ball in Euronext’s court. The owner of the Paris and Amsterdam exchanges said it was in talks with the Spanish firm’s board as Chief Executive Officer Stephane Boujnah hunts for deals to build scale and enter new markets. He most recently won a fight with Nasdaq Inc. for the Oslo exchange, and the Madrid bourse is one of the few substantial independent exchanges remaining in Europe.
“The premium SIX has offered is quite high,” said Matthias de Wit, an analyst at Kempen & Co. “I hope Euronext will stay disciplined and not outbid SIX to acquire BME, as I consider the valuation quite punchy.”
BME shares rose as much as 37% in Madrid, surpassing SIX’s offer price of 34 euros per share. Euronext climbed 1.5% in Paris, bringing its surge this year to 45%.
BME described SIX’s offer as “amicable” and reflective of its value, and agreed to a break fee of 0.5% of the ultimate transaction price, equivalent to 14 million euros with the current bid. However, it previously confirmed what it called “preliminary talks” with Euronext and said that no decision had been taken on that approach.
Euronext thinks it’s in a good position given Switzerland’s uncertain regulatory relationship with the European Union, and will decide quickly this week if it wants to match or beat SIX’s bid, according to a person familiar with the situation. It could offer a choice between cash or shares, aiming to appeal to shareholders who want to maintain an investment in an exchange, the person said, requesting anonymity to discuss private deliberations.
EU Battle
For Switzerland’s dominant exchange, BME’s appeal may be rooted in the Alpine nation’s battle with the EU. In August, people familiar with the matter said the Spanish company was a potential target for SIX in case the EU’s ban on the trading of Swiss equities inside the bloc endured or escalated.
In Monday’s statement, SIX Chairman Romeo Lacher said the deal aimed to provide “seamless access to capital markets,” and BME said SIX’s plan was to use the Spanish firm as a platform to grow in the EU.
However, SIX CEO Jos Dijsselhof said on a call that the bid was unrelated to the EU dispute and unlikely to affect it, and that his firm didn’t consider buying a different exchange. He said that there’s a drive for consolidation in the industry, and a trend for exchanges to diversify their business mix.
“Trading in Swiss shares will stay in Switzerland now and forever,” Dijsselhof said, when asked whether the BME exchange would be used to allow EU investors more access to Swiss shares via that platform.
Still, some observers were skeptical that the spat with the EU wasn’t a factor. The surprise offer is a dramatic reversal of course for the Swiss company, which just three months ago said it saw “no need to buy a stock exchange in the EU.”
“For the Swiss, the showdown about equivalence means having a foothold within the EU is important, and I would expect that to be their number one trigger,” said Niki Beattie, the founder of Market Structure Partners, a consultancy in London. “For Euronext, it’s part of their mission to grow the exchange across Europe. I expect they have simply gone on the offensive as they don’t want to see BME taken off the table.”
After hearing speculation SIX was considering an offer, Boujnah made a hastily convened trip to Madrid on Saturday to meet with executives at BME, and discussed governance and regulatory issues, the person familiar with Euronext’s plans said.
People familiar with the matter told Bloomberg News earlier this month that Euronext was considering both the Spanish exchange and Italy’s Borsa Italiana as targets. That prompted Boujnah to say at the time that there was “no substance whatsoever” and that no dialogue had taken place with either bourse.
Dealmaking in the exchange sector has gathered pace. Besides Euronext’s months-long battle for the Oslo exchange earlier this year, Hong Kong Exchanges & Clearing Ltd. abandoned its 29.6 billion-pound ($38 billion) bid for London Stock Exchange Group Plc after failing to win over investors.
Analysts at Citigroup Inc. had called BME their least preferred exchange stock, given its limited prospects for growth. De Wit, the analyst at Kempen, said BME presents SIX with limited synergy opportunities and exposure to volatile equity trading.
Corporacion Financiera Alba SA, whose 12.1% stake makes it BME’s largest shareholder, said it won’t yet comment on the bids.
Morgan Stanley is advising BME. Credit Suisse advised SIX and is providing the Swiss firm with a bridge loan. SIX was also advised by Alantra Partners SA, a Spanish investment bank.