Euronext chief eyes assets as exchange industry consolidates
Stéphane Boujnah, the chief executive of pan-European exchange Euronext, refuses to be left out of the consolidation that is shaking up his industry.
In the middle of a proposed $30bn mega-merger between London Stock Exchange Group and Deutsche Börse to create an European exchange group to rival those in the US and Asia, he has his own card to play.
With strong cash generation and low debt “we will be able to move very quickly for very significant [acquisition] targets if opportunities come up”, he says, in an interview from his office in Paris’s La Defence business district.
“There are independent exchanges in the eurozone that may want to reconsider their future,” says the 52-year-old former Santander banker who took over the job at Euronext last November. “They may want to be part of a pan-European exchange group where they can still keep their identity but grow at the same time.”
Euronext, which was spun off from US group Intercontinental Exchange in an initial public offering in 2014, runs the Paris, Amsterdam, Brussels, and Lisbon exchanges. Independent exchanges in Europe include Madrid, Luxembourg and Vienna.
He says others assets that could be bought over the coming years include those that might be sold off to win regulatory approval for the LSE-Deutsche Börse deal, which is expected to close at the start of next year.
“Some assets might be sold [as part of the deal], and some of those assets might be interesting to look at,” he says.
Analysts say the LSE may, for example, have to sell down its 57 per cent stake in LCH.Clearnet, a clearing house for derivative and bond trades. Deutsche Börse owns Clearstream, one of Europe’s biggest settlement houses.
Large deals are not the core of the group’s three-year strategy, however. The exchange’s official plan, outlined in May, is to grow “quasi-organically”, investing €100m-€150m by 2019 to diversify away from core equity strength. The group wants to grow in areas such as data analytics, exchange traded funds, open-source indices and commodities.
The company plans to increase revenue by about 5 per cent a year and increase group operating margins from 57 per cent today — already one of the highest in Europe — to between 61 and 63 per cent by 2019.
But Mr Boujnah says the group cannot just be “more efficient”, however. “When you are small, you can be agile, and you must be agile . . . The conditions are there for us to be able to use our balance sheet to react very quickly.”
The interest in larger deals comes in part because Euronext, with a market value of about €2.4bn, is already about four times smaller than rivals LSE and Deutsche Börse. A merger between these two exchanges would make Euronext a minnow in Europe.
Mr Boujnah is keen to stress that the LSE-Deutsche Börse deal is far from done, however. “All I can say is that the last 20 years show that these transformational deals always take a lot longer than expected and never turn out as initially anticipated.”
He highlights some of the potential hurdles. “The Deutsche Börse shareholders, the LSE shareholders, the European Commission, the prudential supervisors and various other regulators in Germany all need to sign off on this. Anything can happen.”
Careful not to criticise the deal itself, he says there could be competition issues creating a trading group that will be roughly 10 times the size of Euronext, its next largest competitor in Europe.
He says that the combination of LCH and Eurex Clearing “is essentially combining two banks” and could raise “too big to fail issues”.
Mr Boujnah adds that there is also a risk of the value of the two companies changing, particularly following this week’s referendum on whether or not the UK will remain in the European Union.
“It is always difficult to deliver any paper deal a year from closing, let alone with Brexit in the middle.”
His carefully chosen words belie the intense lobbying that is going on in France against the British-German deal.
Michel Sapin, French finance minister, said in May that he wanted to “express the concern of the French government on this tie-up . . . We have doubts about the consequences this could have for the financing of the real economy in France and Europe”.
Mr Boujnah says that if the LSE-Deutsche Börse deal does go ahead, it will not change the core strategy for Euronext. “They [Deutsche Börse and LSE] will focus on being a global player in indices, derivatives and post trade,” he says.
The goal of Euronext is to concentrate on profitability, strengthening the core business, and “focus on financing the real economy in Europe”, he says.