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Abu Dhabi, UAEMonday 17 December 2018

Euronext buys Irish Stock Exchange in pre-Brexit move

Exchange operator purchases bourse with financial operations set to leave London after EU divorce

Government Buildings in Dublin, Ireland. Euronext has bought the country's stock exchange. Clodagh Kilcoyne/Reuters
Government Buildings in Dublin, Ireland. Euronext has bought the country's stock exchange. Clodagh Kilcoyne/Reuters

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

The Amsterdam-based exchange operator, which has said it’s seeking to double in size, agreed to buy Irish Stock Exchange (ISE) for €137 million (Dh595.3m) from its joint owners - Investec, Cantor Fitzgerald and the Irish brokerages J&E Davy, Goodbody Stockbrokers and Campbell O’Connor, according to a statement after markets closed Wednesday. The stock jumped 3.5 per cent.

“This whole exchange game is a big boys’ business where you have to realise economies of scale,” said Steve Grob, the director of group strategy at Fidessa Group. “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 centre 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, which will probably have to move staff to keep their European Union passporting rights.

The Dublin-based exchange “is ideally positioned to benefit from market opportunities in a post-Brexit environment”, said the Euronext chief executive Stephane Boujnah. The purchase brings “leading global positions in debt, funds and ETF listings markets”.

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

As part of the takeover, ISE chief executive Deirdre 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,” said Lee Hodgkinson, who heads Euronext London. Euronext also plans to bring listed agriculture futures to Ireland, he 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 to invest as it seeks to diversify its revenue sources. The world’s biggest exchanges are still looking to consolidate, though Deutsche Boerse’s acquisition of London Stock Exchange failed earlier this year.

Federico Braga, an analyst at UBS, said further consolidation would be challenging.

“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.”