Dutch, French regulators vie for control of Euronext - sources

NEW YORK Tue Oct 15, 2013 6:34pm BST

The NYSE Euronext flag hangs outside the New York Stock Exchange in New York December 20, 2012. REUTERS/Andrew Kelly

The NYSE Euronext flag hangs outside the New York Stock Exchange in New York December 20, 2012.

Credit: Reuters/Andrew Kelly

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NEW YORK (Reuters) - With IntercontinentalExchange's more than $10 billion (6.2 billion pounds) takeover of NYSE Euronext expected to close early next month, regulators in the Netherlands and France are scrambling to prevent Euronext from once more falling into foreign hands, according to several sources familiar with the situation.

ICE had committed to spinning off Euronext, the operator of stock exchanges in Paris, Amsterdam, Lisbon and Brussels, to secure regulatory approval for the NYSE Euronext deal. But some rivals have expressed an interest in buying the pan-European exchange operator instead.

London Stock Exchange officials have reached out to ICE informally about possibly buying Euronext, two sources said. In January, Nasdaq OMX Group Inc Chief Executive Robert Greifeld told Reuters that his firm would also consider bidding for Euronext if the opportunity arose. [ID:nL5E9CACRS] All the exchange operators declined to comment.

The regulators, which include the Bank of France and the Dutch Authority for the Financial Markets, want Euronext to be independent, with headquarters and top executives located in their countries.

"I will give my support to an IPO that would anchor Euronext's shareholding in the euro zone because it is in the interest of banks, businesses and investors in the euro zone to have a major regulated market that is solid and efficient," Bank of France Governor Christian Noyer said.

The Dutch Authority for the Financial Markets, which has a say in any investment in Euronext of 10 percent or more and is advising the Dutch Ministry of Finance on the future of the exchange, declined to comment.

The jostling around Euronext is not likely to affect the closing of the ICE-NYSE deal, which is expected on November 4. But it throws the future of Euronext into question and highlights how nationalism continues to play a role in deals for exchange operators, which are sometimes seen as key to a city's continued relevance as a financial centre. Several exchange mergers have been blocked in recent years by national regulators.

French and Dutch regulators do not want to end up in a position where they have to publicly block a takeover of Euronext, one source said.

To prevent that, French regulators earlier this year began discussions with financial institutions in the country about the possibility of taking a large stake in Euronext. Major French banks, such as Societe Generale, Credit Agricole and BNP Paribas SA, as well as insurer AXA SA were approached.

The conversations also included Dutch firms, such as ABN Amro, one source said.

The financial institutions, however, have been lukewarm to the idea of investing in a low-margin, stock exchange business. They are looking for tax breaks and other financial incentives from their regulators in exchange for buying a stake in the European exchange operator, the source said. The talks are ongoing, the sources said.

AXA, ABN Amro, Societe Generale and BNP Paribas declined to comment. Credit Agricole did not return calls seeking comment.

The regulators also see potential in Euronext as an acquirer of other continental European exchanges, one source said. Scale is important for equity exchanges, as sharing technology and the potential for listings and data revenue makes the businesses more viable.

"They don't want to get swallowed by LSE or Nasdaq, because they want to be in charge," one source said. "The issue really is, 'Where is the centre, and who gets the most prestige in the entity?'"

Before NYSE bought Euronext in 2006, the exchange was headquartered in Paris and Amsterdam. But then decision-making moved across the Atlantic to New York, and some businesses left Paris, moving to London and other cities. The move caused alarm among French authorities, one source said.

"They see it as having decimated the Paris financial centre," one source said.

For now, ICE and NYSE's plan continues to be an initial public offering of Euronext.

They have tapped ABN Amro, JPMorgan Chase & Co and Societe Generale to help arrange a potential $1 billion IPO, but a sale is not off the table. Sources have told Reuters that ICE would consider selling Euronext if the regulators would allow it.

For European regulators, "the more assurances, the better that this won't get flipped somewhere," a source said.

(Reporting by Jessica Toonkel and John McCrank in New York; Additional reporting by Lionel Laurent and Jean Baptiste Vey in Paris; Anthony Deutsch in Amsterdam; Sophie Sassard, and Clare Hutchison in London, and Christian Plumb in New York; Editing by Paritosh Bansal and Marguerita Choy)

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