Euronext is to buy Borsa Italiana from London Stock Exchange for 4.33 billion euros ($5.09 billion) in cash, the firms said on Friday, in a major expansion of the French operator's network of European trading platforms.
LSE entered exclusive talks with Euronext last month after the Paris bourse owner saw off competition from Deutsche Boerse and Swiss rival SIX.
LSE is selling Borsa as part of regulatory remedies to see through its $27 billion purchase of data provider Refinitiv, which is 45% owned by Thomson Reuters, the parent company of Reuters News.
The sale is contingent on the European Commission formally stating it will only approve the Refinitiv deal if all or part of Borsa Italiana is sold.
“We believe the sale of the Borsa Italiana group will contribute significantly to addressing the EU’s competition concerns,” LSE Chief Executive David Schwimmer said in a statement.
Euronext, which has a market value of around 7 billion euros, will fund the deal through a debt and equity hike as well as existing cash.
“Euronext will significantly diversify its revenue mix and its geographical footprint by welcoming the market infrastructure of Italy, a G7 country and the third largest economy in Europe,” Euronext CEO Stephane Boujnah said in a statement.
The company said the deal was expected to be immediately accretive to its adjusted earnings per share before synergies.
The sale of Borsa is politically sensitive in Italy due to Borsa’s ownership of MTS, the bond platform which handles trading of Italy’s 2.1 trillion euro ($2.5 trillion) government bond market.
To secure the backing of the Rome government, Euronext has teamed up with state agency Cassa Depositi e Prestiti (CDP) and Italy's biggest bank Intesa SanPaolo.
Reporting by Maya Nikolaeva, Sudip Kar-Gupta and Rachel Armstrong; editing by Simon Jessop and Jason Neely