Pan-European exchange Euronext has made an irrevocable cash offer to acquire clearing and central counterparty (CCP) services provider LCH.Clearnet.
The two companies already have a long-standing relationship: Euronext has cash equities and derivatives clearing agreements with LCH.Clearnet (which expire in December 2018).
Euronext has offered €510 million for LCH.Clearnet. The purchase will be funded through a combination of debt facilities and existing cash.
Rothschild is acting as sole financial adviser to Euronext on this transaction.
LCH.Clearnet is currently owned by the London Stock Exchange Group (LSEG). It services European electronic trading platforms and OTC markets, with gross income of €137 million, profit after tax of €36 million, and shareholders’ equity of €301 million.
The transaction is contingent on, among other things, completion of the Deutsche Börse and LSEG merger, which is currently under review by the European Commission and other authorities.
Euronext’s shareholders are also yet to approve the acquisition, as well as anti-trust bodies in France and Portugal, and various regulatory bodies.
“The contemplated transaction is expected to generate significant cost synergies, the majority of which are anticipated to be delivered by 2020,” Euronext says. These include:
- Annual pre-tax operating cost synergies are expected to amount to around €13 million per year, primarily driven by IT savings and operational efficiencies. These are expected to be mostly delivered by 2020 and fully delivered in 2022.
- One-off costs related to transaction expenses, the carve-out and integration of LCH.Clearnet and the implementation of the cost optimisation plan are estimated at circa €40 million.
- Additional revenue synergies have also been identified resulting from the launch of trading in new products, in particular targeted at the clients of LCH.Clearnet’s Fixed Income and CDSClear businesses, and clearing related to additional Euronext products.