Euronext Buys Irish Stock Exchange for ETFs in Brexit Play

Updated on
  • Irish market is hub for exchange-traded funds in Europe
  • Euronext to pay $163 million to acquire its sixth core market

Euronext NV is expanding into Ireland by acquiring the nation’s stock exchange, a hub for ETFs that’s set to benefit as financial activities leave the U.K. after Brexit.

The Amsterdam-based exchange operator, which has said it’s seeking to double in size, agreed to buy Irish Stock Exchange Plc for 137 million euros ($163 million) from its joint owners -- Investec Plc, Cantor Fitzgerald and Irish brokerages J&E Davy, Goodbody Stockbrokers and Campbell O’Connor, according to a statement after markets closed Wednesday. Euronext’s stock jumped 3.5 percent.

“This whole exchange game is a big boys’ business where you have to realize economies of scale,” said Steve Grob, director of group strategy at Fidessa Group Plc. “Euronext have proven that they can go and execute on these deals, get the synergies and move on to the next deal. There’s absolutely room for a nimble European player.”

The acquisition gives Euronext the home venue for Irish equities, but also a market for debt securities and the largest European center for exchange-traded funds. Ireland, which will be Euronext’s sixth “core European country” alongside the main exchanges in France and the Benelux nations, is also set to add jobs from London-based banks such as Barclays Plc, which will probably have to move staff to keep their European Union passporting rights.

Deirdre Somers and Stephane Boujnah on Nov. 30.

Photographer: Patrick Bolger/Bloomberg

Euronext “is ideally positioned to benefit from market opportunities in a post-Brexit environment,” Chief Executive Officer Stephane Boujnah said in the statement. The purchase brings “leading global positions in debt, funds and ETF listings markets.”

The deal will help the Irish Stock Exchange “make the most of Brexit,” CEO Deirdre Somers said at a press conference in Dublin on Thursday.

In the nine months to the end of September, the ISE’s earnings before interest, taxes, depreciation and amortization grew 22 percent year-on-year to 8.5 million euros. Revenue was 24.2 million euros.

To read about Euronext’s acquisition plans, click here.

As part of the takeover, ISE boss Somers will join the Euronext managing board, taking responsibility for debt, funds and ETF listings.

“The combined firepower of Euronext and Irish Stock Exchange in the ETF business is going to be particularly important -- Ireland has a fantastic listing franchise,” Lee Hodgkinson, who heads Euronext London, said on a conference call. Euronext also plans to bring listed agriculture futures to Ireland, Hodgkinson added.

The deal is expected to close in the first quarter of 2018, subject to regulatory approval.

Euronext said in July that it had as much as 2 billion euros to invest as it sought to diversify its revenue sources. The world’s biggest exchanges are still looking to consolidate, though Deutsche Boerse AG’s acquisition of London Stock Exchange Group Plc failed earlier this year.

Federico Braga, an analyst at UBS Group AG, said further consolidation would be challenging for Euronext.

“Looking forwards, it’s tough to say what the company will look at as there aren’t many options available,” he said. “Multiples are high in market data and index businesses.”

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