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CLASS

Singapore raises doubts about the merger between LSE and Refinitiv

July 03, 2020


Abstract : The future of the Italian Stock Exchange can depend from this operation. Doubts by the Antitrust of the city-state. The EU Commission as well has started a deep investigation in order to understand the effects on competition in the government bonds market.

MILAN, July 2 (Class Editori) - The Antitrust of Singapore has declared to have raised concerns related to the merger between the London Stock Exchange and the data analysis company Refinitiv. For this reason, the Commission for competition and competitors of the city-state has been closely monitoring the agreement, worth 27 billion dollars, which closely affects the Italian Stock Exchange as well, because it is the subsidiary of the LSE.

The doubts of Singapore are added to the ones expressed by the EU Antitrust. Last Monday, the EU Commission decided to start a deep investigation on the operation. The merger between the LSE, which has been controlling Borsa SpA since 2007, and the database held by Blackstone (55%) and Reuters (45%) could have an impact on the trading of European government bonds.

The merger between the MTS platform of the Italian Stock Exchange and Tradeweb of Refinitiv would ensure to the LSE "a large market share in the electronic trade" of the EU, Swiss and British government debt. Having to decide between the sale of the US Tradeweb or Bondvision, the latter should be the preferred choice, according to leaks. In this framework, also the Italian-French project – already disclosed by MF-Milano Finanza – has been added: it is about acquiring the whole Borsa SpA together with Euronext, by involving the respective CDPs and creating a European power in the context of the Capital Market Union.

This suggestion seems to have already been approved by the Bank of Italy. According to Bankitalia, the operation provides for the LSE to sell the whole company and not only MTS, the international platform of the Italian government bonds, or a part of it (Bondvision); London is evaluating this possibility in order to allay the concerns of the EU Antitrust. However, MTS is part of a vertical supply chain, which includes also a Guarantee Fund (Cassa Compensazione e Garanzia) that is assuming the default risk of the counterpart, and Monte Titoli, which manages the pre-placement, placement and safekeeping of the securities, bonds as well.

If we look at Borsa SpA financial statement of 2019, it is clear that revenues have been equal to €181.64 million with a very high profit amounting at 139.6 million. The net result has significantly been affected by MTS&Co, its supply chain. MTS Spa distributed dividends in 2019 addressed to the Italian Stock Exchange amounting at €13.7 million, to Cassa Compensazione and Garanzia (44.55 million) and to Monte Tivoli (21.35 million). In total, they are 79.6 million, which, compared to 139.6 million, account for 57.02%, which is more than a half of the profits. Dividing only MTS from the Italian Stock Exchange means to break the strength of a structure, which accounts for 50% of the Italian reality.

In the last months, also the Hong Kong Stock Exchange focused on the Italian Stock Exchange. When in September it proposed to acquire the London Stock Exchange which controls Piazza Affari and MTS (the government bond platform), the board of the LSE had promptly declined the proposal by choosing to acquire Refinitiv, the huge database owned by Blackstone (55%) and Thomson Reuters (45%). Even then, the Chinese group was interested in building a bridge with Europe, not only in London, but also in Italy, which was considered strategic with the entire Borsa SpA package and its subsidiaries.

Hong Kong has then paid attention to the Madrid's list, but in the meantime, the friendly takeover bid by SIX- the Stock Exchange of Zurich- arrived with such a bonus to make impossible a further offer by other interested players today. With Brexit, whose terms are unclear again, it re-emerges now the theme of Borsa SpA loneliness.

(Source:Class Editori)

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Keyword: LSE Refinitiv

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