Jean-Francois Theodore

Chairman and Chief Executive, Euronext

Jean-Francois Theodore, boss of the Paris Bourse, looked like the loser when Deutsche Borse and the London Stock Exchange announced plans to marry last year. But the deal collapsed, and now, in an unexpected twist, Theodore has emerged as the only European exchange exec to pull off a cross-border bourse merger: Euronext was formed last fall from the Paris, Amsterdam, and Brussels exchanges. And now Theodore is taking his baby public, with a planned share offering this summer that could value Euronext at nearly $3 billion, fattening its purse for future expansion. "We have the technology and the base, and we intend to stay at the forefront of this industry," Theodore says.

With a low-key style that masks fierce determination, Theodore, 54, has made Euronext a major force in the push to consolidate Europe's financial markets. His three-way merger adds up to equity trading volume of more than $1.5 trillion annually, far more than either the German or London exchange. He's installing a unified system for trading, clearing, and settlement, using state-of-the-art technology that will make trading more efficient and less expensive--exactly what stock exchange customers clamor for. "He's managed to knit together three diverse markets very successfully and take the best from each," says Stephen Wilson, business development director for London-based virt-x PLC, an off-exchange trading system for institutional investors.

Theodore, an alumnus of France's elite Ecole Nationale d'Administration and a former Finance Ministry official, has been urging consolidation of Europe's balkanized stock exchanges since he became chief of the Paris Bourse in 1991. He contends that consolidation is essential if a culture of shareholding is to take root across Europe. The introduction of the euro and the advent of more sophisticated trading technology has only fueled the momentum, Theodore says. In 1998, he took part in talks to create an alliance of European exchanges. The effort failed, and Theodore says in hindsight that it was a mistake. "We are an industry like any other," he says. "We shouldn't speak of alliances as if we are diplomats. We should speak of mergers, return on equity." Within a few years, he expects only three or four Western European stock exchanges to remain, down from 16 today.

If Theodore has his way, Euronext will be among the survivors. But the next step in its expansion could prove tricky. True, he could pick up some smaller exchanges--he's already talking with Lisbon, for example. And he's looking to sign up more business for Clearnet, Euronext's wholly owned clearing subsidiary, which processes trades for 14 exchanges around the world. But Werner G. Seifert, the aggressive chief executive of Deutsche Borse, also is looking for cross-border expansion and acquisitions, and he recently led an IPO that raised over $900 million. London, the region's other heavyweight exchange, says it wants to remain independent, and rebuffed an offer from Theodore last year for what he called a "merger of equals" with Euronext.

Theodore has some advantages over the competition, though. For example, Euronext allows listing companies to follow the securities regulations of their home countries. That issue was a sticking point in the failed Deutsche Borse-LSE deal, which raised hackles in Germany because it would have required German issuers to list under British regulations.

Some brokers have complained, however, that Euronext's trading model doesn't show the name of the counterparty on each transaction, making it difficult for market players to track the competition.

At least Theodore's affable personal style could make it easier for Euronext to seal cross-border deals: Seifert's ferocious manner has sometimes hindered the German's ambitions. Still, Theodore admits it won't be easy. "Two-century-old structures are not going to change in a day," he says, recalling that the three bourses now rolled into Euronext date as far back as the 1600s. But Theodore is set for the long haul.

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