Euronext to Acquire Irish Stock Exchange

Euronext announced the acquisition of 100% of The Irish Stock Exchange plc (ISE), for 137 million.

ISE is currently owned by five Irish financial institutions, J&E Davy, Goodbody Stockbrokers, Investec Capital & Investments, Cantor Fitzgerald and Campbell OConnor that have all committed to sell their shares.

The transaction is subject to regulatory approvals and is expected to close in Q1 2018.

A strategic venue to join Euronexts federal model

Headquartered in Dublin, ISE is Irelands incumbent stock exchange operator and a global leader in thelisting of debt and funds securities. ISE is the first pool of liquidity for Irish equities (51 listed companies, c. 122bn total domestic equity market capitalisation[3]), the first debt listing venue globally (30,000+ securities and listings1 from 90 countries) and the first fund listing venue globally (5,242 Investment Funds Securities and 227 ETFs1).

ISE generated revenue of 29.4m, EBITDA of 9.6m and a net income of 8.0m in 2016. For the first 9months of 2017, ISE generated 24.2m of revenue, up +13.3% compared to the same period in 2016, and an EBITDA of 8.5m, up +22.4% compared to the same period in 2016.

The combined group pro forma 9 months of 2017 revenue would amount to 416.9m and an EBITDA of 227.7m before synergies.

ISE to join Euronexts federal model for further growth opportunities and increased efficiency

The transaction brings together two highly complementary businesses with significant growth opportunities and expands Euronexts federal model to a new attractive European country. It creates aleading global player in debt and fund listings, combining the listing expertise of ISE with the traded markets expertise of Euronext.

Euronext will benefit from ISEs leading global positions in debt and fund listings as well as its unique product and listing expertise. The acquisition will also enhance Euronexts growth outlook thanks to ISEs embedded core businesses growth, complemented by the additional strategic growth plans for ISE, which will be reinforced with the full support of Euronext.

Ideal positioning of ISE in a dynamic environment, to take advantage of post-Brexit opportunities

The acquisition of ISE by Euronext, combined with Irelands very competitive economic environment, will further strengthen Irelands position as a strong European anchor to take advantage of Brexit opportunities. This transaction will also develop the Irish capital markets ecosystem within a European context and as part of Euronexts core mission to power the real economy.

ISE is at the centre of Irelands highly competitive financial ecosystem. The country provides a recognized finance-friendly environment, with a highly educated workforce, and a business-oriented mind-set, as well as an attractive economy within the Eurozone, with forecast GDP growth of c.3.8%[4] 2017e-18e. Ireland is in a strong position to seize opportunities arising from Brexit since it is both close to the UK business culture and strongly rooted inside the Eurozone.

Dublin will have a strong group-wide position within Euronexts highly inclusive federal governance structure, notably as the global centre of excellence for all Euronexts group-wide activities in the listing of debt, funds and ETF securities.

ISE will then benefit from a strong European anchor to support and develop the Irish listed companies ecosystem within a European context and as part of Euronexts core mission to power the real economy.

Integrated federal governance at the core of Euronexts federal model

Deirdre Somers, CEO of ISE, will join Euronexts Managing Board[5] with group-wide responsibility for Debt, Funds & ETFs listing.

Padraic OConnor, Chairman (Non-Executive) of ISE will be proposed as a new member of Euronexts Supervisory Board to the next Annual General Meeting of Euronext.

In addition, ISEs regulator, the Central Bank of Ireland, is expected to join Euronexts College of Regulators.

A stronger future for ISE within the Euronext federal model

Euronext will provide ISE with its traded markets expertise, large customer base, state-of-the-art proprietary technology and widespread distribution channels, as well as a full suite of pre and post listing services to ISE equity issuers.

The combination will increase liquidity and efficiency for issuers, members and listing customers through the integration of ISE members to Euronexts trading platform. ISEs additional incremental growth opportunities include:

  • Leverage the unique complementarity of the Irish market to the UK to deliver Brexit solutions
  • Focus on ETF as an asset class. Combine ISE network, issuer/listing expertise with Euronext pan EU trading platform and innovation capability to deliver pan EU ETF Trading hub
  • Develop an Irish agricultural commodity business by leveraging Euronexts expertise
  • Provide ISE trading members access to global FX markets through Euronexts high-efficiency platform FastMatch
  • Combine ISEs global position in debt listing with Euronext Synapse as a catalyst for future fixed income innovation

Increased efficiency thanks to integration of ISE within Euronext

The transaction is financially compelling for Euronexts shareholders with recurring EPS accretion in the first year and return on capital employed above Euronexts cost of capital within year three.

The integration of ISE within Euronext is expected to generate run-rate pre-tax operating cost synergies of 6m per annum, to be fully delivered in 2020, primarily driven by i/ the migration to OptiqTM, Euronexts new state-of-the-art proprietary trading platform, ii/ the aggregation of a Pan-European offering on market data by migrating ISEs current offering onto Euronexts platform and iii/ ISE benefiting from using Euronexts support functions.

As part of the integration, total costs of c.9m will be incurred in the first years of implementation, with full integration expected by 2020.

Continued financial discipline while optimising balance sheet structure of Euronext

This acquisition is part of Euronexts strategy to actively leverage its balance sheet, while retaining financial flexibility, to capture value accretive opportunities and accelerate growth and strengthen its revenue profile.

Euronext is to pay for 100 % of ISEs shares 137 million of enterprise value on a debt free, cash free basis, and excluding existing regulatory capital requirements (estimated at 21.8m). Thetransaction will be fully funded by debt.

As a reminder, as of 30 September 2017, Euronext had cash and cash equivalents of 140.6m, and 164.7m of outstanding long-term debt and strong liquidity through an undrawn Revolving Credit Facility of 25 million.



[4] Source: IMF, Global Prospects and Policies – October 2017

[5] To be proposed at the next general meeting of shareholders