London Stock Exchange (LSE) has agreed a €510m ($531m)
cash deal with Euronext to offload Clearnet, its French
clearing arm, although the sale rests on the LSE’s
mega-merger with Germany's Deutsche Boerse going ahead.
Both Euronext and the LSE entered into negotiations over the
sale of Paris-headquartered Clearnet before Christmas and
details of Euronext's bid were revealed on Tuesday.
A period of consultation is now underway at the LSE and the
group's officials have granted exclusivity to Euronext, ruling
out rival bids from the likes of Nasdaq or CME.
The LSE’s move to offload the Clearnet, which
as a central counterparty (CCP) clearing derivatives and other
securities, is key to its $25bn tie-up with Deutsche
The pair of exchanges said in late September they are
prepared to sell Clearnet to allay competition concerns linked
to their merger after the European Commission cited a reduction
of competition in clearing as a risk when referring the
proposed deal to an in-depth probe.
However, there are still doubts as to whether the deal will
"We believe a sale to [of Clearnet] Euronext might go some
way to appeasing the European Commission's many concerns, but
we remain mindful of the many challenges that still need to be
overcome for it to complete (competition authorities,
regulatory concerns, national pride) and the long list of
failed M&A deals within this sector," said Numis analyst
Jonathan Goslin in a note to clients on Tuesday.
Clearnet generated net profit of €36m in 2015 and is of
a handful of clearing houses owned by the LSE.
Clearing services for cash and repo transactions across
French, Italian and Spanish Government bond markets contribute
over a third of revenues last year. Listed derivatives
and commodities counted for 20%.
Euronext expects to achieve cost savings of €13m a year
by 2020 and the acquisition is expected to be double-digit
accretive to Euronext’s earnings from the first
full year post completion.
The business, which operates exchanges in Paris, Portugal,
Brussels and the Netherlands, was spun off from the NYSE
Euronext group in 2014 following the acquisition of NYSE
Euronext by the IntercontinentalExchange.
In 2013, Euronext signed a deal with LCH.Clearnet for the
CCP to provide derivatives clearing for the exchange. This deal
expires in 2018 giving Euronext the option to explore a new
Last year, it acquired a 20% stake in equities clearinghouse
Should the deal complete it will give Euronext ownership of a
derivatives CCP, a key strategic advantage for the exchange
as it seeks to expand its product base and grow a fixed
income derivatives market.