Valuation challenge may thwart Euronext sale

Plans to dispose of markets operator Euronext after IntercontinentalExchange (ICE) acquires its parent firm NYSE Euronext has attracted widespread interest, but establishing a precise value for the entity will prove difficult, an expert has warned.

Plans to dispose of markets operator Euronext after IntercontinentalExchange (ICE) acquires its parent firm NYSE Euronext has attracted widespread interest, but establishing a precise value for the entity will prove difficult, an expert has warned.

ICE has indicated an IPO process for Euronext is likely, although there is a chance Euronext, which operates four European exchanges, will be subject to an auction process amongst market operators.

Late last month, ICE sources reported that the business would be spun out via an IPO in 2014, though there has also been talk of the firm running a dual-track process to sell Euronext.

A valuation of $1.4 billion for the European exchange has been circling, though one analyst told theTRADEnews.com that there are a number of uncertainties surrounding the sale, and Euronext's value.

"Euronext is probably worth somewhere from $1-2 billion, so the rumoured valuation sits in the middle of that," said Peter Lenardos, director of pan-European diversified financials at RBC Capital Markets. "However, right now we have very limited knowledge about Euronext, such as what kind of growth does it have, what technology platform will it use, how is its balance sheet structured? This is why I've given it such a wide valuation range."

He adds that an apparent climb-down on the European financial transaction tax might also help bolster Euronext's valuation.

Private equity buyers have been linked to the deal, with former Chi-X Europe head Peter Randall widely rumoured to be assembling a buyout consortium.

Lenardos said all the major exchange groups are likely to take a look at Euronext, including Deutsche Börse, London Stock Exchange Group and Nasdaq OMX. However, regulators are thought to favour a listing of Euronext in continental Europe, with the French government thought to be asking banks to back a spin-off IPO.

ICE's CEO, Jeff Sprecher, has also said that an independent Euronext could be well placed to cooperate with other European exchanges to add value to its businesses.

ICE's $8 billion takeover of NYSE Euronext is currently awaiting regulatory approval and is expected to complete before the end of 2013.

Despite the exact process, the sale of Euronext will alter the European exchange market during a time of major consolidation, with larger players seeking to expand market share, and smaller exchanges teaming up to protect themselves from potential takeovers.

One such team up mooted recently is Warsaw Stock Exchange's (WSE) potential tie-up with the Vienna Borse. Last week, WSE CEO Adam Maciejewski said he was hopeful a deal would emerge soon.

However, a WSE spokesperson told theTRADEnews.com that a deal was by no means certain: "We're still doing our due diligence and we need to ensure that any deal we reach with Vienna is in the best interests of our shareholders. There are a lot of details that need to ironed out in terms of how the two businesses could integrate."

The WSE added it does not wish to "go it alone" and will continue to examine options to develop stronger partnerships with exchanges in central Europe.

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