LONDON: London Stock Exchange Group (LSEG) notes the announcement from Euronext and confirms that it expects to close the divestment of London Stock Exchange Group Holdings Italia S.p.A. and its business (Borsa Italiana Group) to Euronext for a total cash consideration of €4.443 billion today.
LSEG’s intention is to use the net proceeds from the Borsa Italiana Group divestment to repay indebtedness related to the Refinitiv acquisition and for general corporate purposes.
LSEG announced on 31 July 2020 that, in the context of the EC’s Phase II review of the Refinitiv Transaction, it had commenced exploratory discussions which may result in a sale of LSEG’s interest in MTS or potentially Borsa Italiana as a whole. Having launched a sale process for each of MTS and Borsa Italiana and having weighed the merits of the divestment of each in the context of the EC’s Phase II review of the Refinitiv Transaction, LSEG concluded it was in the best interests of shareholders to divest Borsa Italiana as a whole.
LSEG also noted the additional benefits of keeping the MTS and Borsa Italiana businesses together for their customers and stakeholders. As a result, and having received and reviewed a number of competitive proposals from several parties for each of MTS and Borsa Italiana, LSEG announced on 18 September 2020 that it had entered into exclusive discussions with Euronext. Those discussions led to the signing of a Share Purchase Agreement (the SPA) between LSEG and Euronext on 9 October 2020.
While the EC’s review of the Refinitiv Transaction is still ongoing, it is LSEG’s expectation that a divestment of Borsa Italiana or a material part thereof (including MTS) will be a condition to any EC clearance for the Refinitiv Transaction. The entry into the SPA, the approval by the EC of Euronext as the acquirer of Borsa Italiana and the receipt of certain other approvals for the Transaction, are therefore expected to be critical factors in the successful attainment of merger control clearance for the Refinitiv Transaction from the EC.
Whilst the principal benefit of the Transaction is to facilitate the completion of the Refinitiv Transaction, the divestment, which represents an enterprise valuation multiple of 16.7x 2019 adjusted EBITDA,(1) allows LSEG to achieve an attractive valuation for Borsa Italiana. The Board believes that the overall strategic rationale for, and financial benefits of, the Refinitiv Transaction remain compelling notwithstanding the divestment of Borsa Italiana.
LSEG is expected to receive proceeds in cash on closing (before deductions of applicable taxes and other transaction related costs) of €4.325 billion plus an additional amount reflecting cash generation to completion. It is LSEG’s intention to use the net proceeds from the Transaction to repay indebtedness related to the Refinitiv Transaction and for general corporate purposes. This will allow LSEG to reduce leverage following completion of the Refinitiv Transaction, bringing LSEG closer to its target net debt to adjusted EBITDA ratio of 1.0-2.0x within a desirable timeframe.
Commenting on the Transaction, David Schwimmer, CEO, LSEG, said: “We continue to make good progress on the highly attractive Refinitiv transaction and we are pleased to have reached this important milestone. We believe the sale of the Borsa Italiana group will contribute significantly to addressing the EU’s competition concerns. The Borsa Italiana group has played an important part in LSEG’s history. We are confident that it will continue to develop successfully and contribute to the Italian economy and to European capital markets under Euronext’s ownership.”
Commenting on the Transaction, Raffaele Jerusalmi, CEO, Borsa Italiana S.p.A, said: “We have enjoyed a long and successful relationship with LSEG, which has invested in and developed our business over the last 12 years. We look forward to embarking on the next phase of our history, working in partnership with Euronext, CDP Equity and Intesa Sanpaolo to further develop our business and to contribute to the development of European capital markets.”
Euronext has launched its share capital increase by way of a rights offer of approximately €1.8 billion as part of the financing of the acquisition of Borsa Italiana.
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