June 10, 2020 / 1:55 PM / 24 days ago

REFILE-Italy's 5-star locked in row over Milan Bourse takeover plan - sources

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By Giuseppe Fonte and Pamela Barbaglia

ROME/LONDON, June 10(Reuters) - As the London Stock Exchange seeks approval for its $27 billion takeover of Refinitiv, uncertainty over the fate of its Italian exchange and bond-trading operations has caused rifts among politicians in Rome, two sources told Reuters.

The co-ruling 5-Star Movement is seeking to lure the country’s biggest financial institutions, including Intesa Sanpaolo, to launch a bid for all or part of the Milan Bourse and avert a possible break-up of the business triggered by the Refinitiv deal, the sources said, speaking on condition of anonymity.

But the plan has run into opposition from other coalition partners, with Economy Minister Roberto Gualtieri - a prominent member of the co-ruling centre-left PD party - resisting the idea of Rome making a bid for all or parts of Borsa Italiana, the sources said.

A senior official close to the Treasury told Reuters that a takeover offer was “not something the finance ministry is currently studying”.

A spokeswoman for the LSE had no immediate comment but said Chief Executive David Schwimmer had previously clarified that Borsa Italiana was not up for sale.

5-Star Movement and the Treasury declined to comment.

The Five Star proposal, crafted with the help of Mediobanca, aims to form a consortium of Italian heavyweights that would back a possible bid by state lender Cassa Depositi e Prestiti (CDP) for Borsa Italiana or its bond-trading platform MTS, the sources said.

Intesa and investment firm Unipol have been identified as possible anchor investors for the bid proposal which would also involve a series of Italian financial institutions that manage pension schemes on behalf of industry corporations, the sources said.

The proposal values the Milan exchange at about 3 billion euros ($3.40 billion) and its main promoter is cabinet undersecretary Riccardo Fraccaro, the sources said.

Representatives for Mediobanca, Intesa and Unipol declined to comment.

The move comes as European Union antitrust regulators are probing the LSE’s deal for Refinitiv, raising the prospect that MTS could be hived off as part of the antitrust remedies to clear the deal.

Rome has long tried to gain control over MTS, which is seen as an asset of strategic interest, the sources said, because Italian sovereign bonds get traded on its platform.

But several sources familiar with LSE’s strategy said any divestment of MTS would hinge on the outcome of the European antitrust review.

“Don’t waste your time discussing Borsa. There’s nothing to discuss,” Schwimmer told a banking source referring to a possible bid by Rome.

One of the sources, who is close to the 5-Star camp, said that Economy Minister Gualtieri would favour a tie up between Borsa Italiana and French stock exchange Euronext.

Euronext’s Chief Executive Stephane Boujnah recently made an approach to the LSE to express interest in buying Borsa Italiana after LSE investors voted in favour of the Refinitiv deal in November, two sources close to the matter said.

But Boujnah’s overture was rebuffed, they said.

Euronext declined to comment on the bid approach which followed Boujnah’s failed attempts to derail a deal between Swiss Exchange SIX and the Madrid bourse BME.

Five Star politicians have so far resisted the idea of a Franco-Italian exchange powerhouse as they first want CDP to secure a seat at Borsa’s board before embarking on merger talks, the first source said.

“The government’s inertia is pushing Borsa into the arms of the French,” said the source close to 5-Star.

$1 = 0.8814 euros Reporting by Giuseppe Fonte in Rome and Pamela Barbaglia in London; additional reporting by Huw Jones

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