StockBeat: LSE's Borsa Sale to Euronext Unlocks Refinitiv Deal
By Geoffrey Smith
Investing.com - Europe's largest stock market deal in years is finally over. The London Stock Exchange Group (LON: LSE) agreed on Friday to sell Borsa Italiana, which also includes the historically lucrative MTS trading platform for Italian bonds, to Euronext (PA: ENX) for sale.
While this is not a transformative deal for either side, it is a formidable win for both sides as Euronext, which owns the Paris, Amsterdam and New York stock exchanges, can strengthen its presence in the largest bond market in the European Union during the LSE exceeds one of the biggest stumbling blocks in the antitrust review of his deal for Refinitiv.
Refinitive is the renamed data company from Thomson Reuters (NYSE: TRI) before it was bought by a Blackstone-led consortium in 2018 (Blackstone (NYSE: BX) is expected to double its money in the process). .
LSE originally agreed to buy it for $ 27 billion over a year ago, but the acquisition, which aims to make LSE a global competitor to Bloomberg in the sale of financial market data, is in Brussels amid concerns about its possible over-concentration Data stuck data.
The review has not been made easier for either the EU or the LSE by the fact that the UK is trying its best to stay outside the reach of EU regulation and has sent increasingly strong signals that it intends to go its own way, as soon as The transition period after Brexit ends on December 31st.
The LSE now assumes that the refinitive deal will be completed by early 2021.
LSE's shares have risen over 56% since the deal was announced, and expectation of the Borsa Italiana deal's completion has held them up well over the past few weeks. The stock rose another 0.5% on Friday. Euronext shares, which have fully participated in the foaming rally in financial market stocks this year, fell 3.7% but are still up a third since the start of the year.
The deal comes at a time when there are doubts about the value of this MTS franchise. Trading Italian bonds was a fantastically profitable thing when volatility was high during the euro crisis, but the EU recovery fund and the European Central Bank's pandemic emergency purchase program of 1.35 trillion euros - the ultimate cash fire blanket - kept the volatility in a market value subdued over 2 trillion euros.
Equally important, the recent local elections indicate that Italy's long flirtation with the populist agenda that is enraging its neighbors in the eurozone to the north is easing. As a result, the yields on Italian 10-year bonds fell to a record low of 0.73%, with the spread over 10-year German bonds also falling to just 127 basis points, the lowest level in four years.
This trend decline in volatility was seen elsewhere recently when interdealer broker TP ICAP (LON: TCAPI) decided to spend $ 700 million on U.S. stock trading platform Liquidnet to grow beyond traditional swap and bond deals.
If the death of bond volatility in the post-pandemic world turns out to be the broader phenomenon many are saying, it will affect Refinitiv's strengths in forex and stock indices, to which volatility has still largely migrated at Bloomberg's expense a fixed income powerhouse. While the owners of LSE may not have anticipated that this will be even smarter with their move than it was 12 months ago.
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