Euronext chief executive Stephane Boujnah has publicly opened the door to a large-scale combination with Deutsche Boerse, arguing that a transaction could create a European market-infrastructure group of far greater scale. Deutsche Boerse says no talks are under way.
Political support for deeper European capital markets is stronger than during earlier failed exchange mergers, but the companies differ greatly in size. Financial Times reporting puts Deutsche Boerse's equity value at about EUR50 billion and Euronext's at about EUR16 billion. On those spot values, Deutsche Boerse shareholders would contribute roughly 76% of a EUR66 billion combined equity value and Euronext shareholders about 24%, before any premium or allocation of merger benefits.
An equal partnership would therefore require negotiation over board control, headquarters, senior management, regulatory relationships and the exchange ratio.
Ownership terms and regulatory remedies will shape any deal
Euronext operates exchanges across eight European countries. Deutsche Boerse controls the Frankfurt market and Eurex, one of Europe's most important derivatives franchises, alongside clearing, data and post-trade businesses. Combining them could bring more listing, trading, derivatives, clearing and market-data activity into one group.
An all-share ratio close to current market values would leave Euronext holders with about one quarter of the group. A larger stake would require a control premium, unusually large identifiable merger benefits attributable to Euronext or a governance concession that Deutsche Boerse shareholders consider valuable.
Neither company has published estimates of merger benefits because there is no transaction. Savings from duplicated corporate functions would be relatively straightforward; deeper liquidity, data cross-selling and lower technology or post-trade costs could be more valuable. Their value depends on what regulators let the combined company keep.
Deutsche Boerse's proposed merger with NYSE Euronext was blocked in 2012, and the European Commission prohibited its proposed combination with London Stock Exchange Group in 2017. Exchange mergers concentrate infrastructure whose value grows with participation. Competition authorities therefore examine derivatives, clearing, trading, indices, data and post-trade services individually; the political case for a European champion cannot settle those questions.
EU policymakers want deeper capital markets and more cross-border financing, and discussions over centralized supervision can reduce some of the fragmentation that complicated previous combinations. That may help a deal, although regulators could still demand asset sales or access remedies that reduce the benefits to shareholders.
Euronext and Deutsche Boerse shares rose after Boujnah's comments, suggesting investors saw value in the possibility of a deal. With no offer, exchange ratio or timetable, there is no merger spread to assess.
At current valuations, negotiations over a EUR66 billion combination would start from roughly 76/24, with two blocked predecessor deals to consider. An exchange ratio, governance plan and regulatory remedy package would need to offer enough value for Deutsche Boerse holders to share control and Euronext holders to accept dilution. Boujnah's comments open that discussion; neither company has begun talks.
Sources
- Financial Times, Euronext openness to a Deutsche Boerse combination: https://www.ft.com/content/cf0ee7e3-8634-4c1d-8a44-3b71acee1417
- Wall Street Journal, market reaction and no-talks status: https://www.wsj.com/business/deals/euronext-deutsche-boerse-shares-rise-after-ceos-merger-comments-4e96bbe9
- European Commission decision on Deutsche Boerse/London Stock Exchange Group: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52017M7995%2802%29