Euronext takes step closer to closing deal for Borsa Italiana

EURONEXT moved one step closer to completing its purchase of Borsa Italiana today after the European Commission approved the London Stock Exchange Group’s (LSEG) proposed acquisition of Refinitiv.

The decision clears a major hurdle for the €4.3bn deal, as LSEG is selling the Milanbased bourse to satisfy competition concerns related to the Refinitiv transaction.

With the issue out of the way, Euronext can move forward on the long list of regulatory approvals in multiple jurisdictions and prepare for the private placement and rights offering needed to fund the deal. The transaction is expected to close in the first half of 2021.

The addition of Borsa Italiana to the Euronext network of stock exchanges – which includes the Irish Stock Exchange – will create a dominant player in European capital markets.

Market sources have said the acquisition will enhance Ireland’s status as a post-Brexit European financial centre for both debt and equity market listings.

Euronext’s plan is to develop a single pool of liquidity across its federation of exchanges, which also includes Paris, Brussels, Amsterdam, Lisbon and Oslo, with one order book on a single platform.

The idea is to form the backbone of the EU’s proposed “capital markets union”.

However, those grand ambitions were cast into some doubt on October 19 when a series of cascading faults across the exchange network completely shut down Euronext for three hours. The outage disrupted normal trading for the rest of the day and caused the closing auction to fail, throwing into doubt the benchmark prices on trillions of euro worth of securities.

The incident prompted the Association of Financial Markets in Europe to question whether one exchange group should have such a dominant position in financial markets.

The question is still live as the Borsa Italiana deal is still subject to a declaration of non-objection from Euronext’s College of Regulators and the approval of Euronext as a suitable purchaser by the European Commission.

More detail about the October outage and the progress of the transaction is expected when Euronext delivers its 2020 results on February 10.

Chief executive Stephane Boujnah said in November that the technical failures would not hinder the group’s chances of securing the required approvals to proceed with the acquisition.