The French government has asked some of the country's largest
banks to invest in the planned spinoff of European stock markets
operated by NYSE Euronext (NYX), said people with direct knowledge
of the matter.
The efforts to keep control of the four bourses in European
hands have so far met with resistance from banks already under
pressure to meet tougher capital standards and handle a proposed
financial transaction tax, said one of the people.
The trans-Atlantic exchange operator has proposed spinning off
its Euronext division after completing its planned takeover by
rival IntercontinentalExchange Inc. (ICE). The business includes
the main securities exchanges in France, Belgium, Portugal and the
Netherlands, and has been valued by analysts at around $1.4
billion.
The merger partners have touted the move as creating a European
"champion" that could bolster capital-raising efforts on the
continent. Spinning off the division could also allow ICE to
sidestep nationalistic worries around the prospect of several
leading European exchanges reduced to a lower profile under an
enlarged, U.S.-based corporate parent.
ICE in December agreed to buy NYSE for about $8.2 billion in a
deal seen creating the world's largest exchange company by
valuation. Antitrust regulators are expected to decide early next
week whether the deal will be vetted by European Union antitrust
examiners, rather than individually by officials in the U.K., Spain
and Portugal.
ICE and NYSE have discussed the proposed Euronext spinoff with
European regulators, including the possibility of forming a stable
shareholder base for the planned venture, according to a person
close to the discussions.
A French government official confirmed the country's finance
ministry had spoken with banks and others about investing in
Euronext. The government is "carefully looking at the situation,
the future of Euronext and its partners," the official said.
The discussions were earlier reported by French newspaper Les
Echos.
The region's financial crisis has taken a toll on European
financial institutions, and regulators are increasing the amount of
capital banks must hold to help ensure stability. This has reduced
the amount of banks' free capital while exchange valuations have
come under pressure due to slower trading activity.
NYSE reported Friday that activity on its European stock markets
last month fell 14% from the prior-year period.
Banks approached over a potential investment in Euronext have
also raised concerns over the prospect of investing in Euronext
because of the proposed tax on trades in stocks, bonds and
derivatives that could soon be implemented in 11 countries in the
European Union, including France, Germany, Spain, Italy and
Portugal, the person said.
Many bankers argue the financial transaction tax, if implemented
at a regional level, would hit the business of exchanges very
hard.
France's three largest listed bank by assets--BNP Paribas SA
(BNP.FR, BNPQY), Credit Agricole SA (CRARY, ACA.FR) and Societe
Generale SA (SCGLY, GLE.FR)--declined to comment.
NYSE Euronext has estimated that its European stocks and
derivatives businesses generated $560 million in revenue over the
12 months ended Sept. 30, 2012, and Sandler O'Neill + Partners
estimated a pretax operating margin of 25% for the unit. That
compares with ICE's overall profit margin of 60% for a business
that is devoted nearly entirely to derivatives trading and
clearing.
Equity Research Desk has estimated that an IPO of Euronext could
value the company at $1.39 billion.
- William Horobin contributed to this article.
By Noemie Bisserbe at noemie.bisserbe@dowjones.com and Jacob
Bunge at jacob.bunge@dowjones.com
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