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LSE mulls Milan exchange sale to ease Refinitiv deal

LSE mulls Milan exchange sale to ease Refinitiv deal

London Stock Exchange (LSE) is reportedly considering the sale of its Borsa Italiana business in order to appease EU regulators and help ease its proposed takeover of data provider Refinitiv.

The $27bn acquisition of Refintiv was initially agreed back in August 2019 but has been subject to scrutiny from international regulators concerned that the deal could be anti-competitive. 

The European Commission (EC) is currently conducting an extensive review while the Singapore regulator also announced its own probe in early July. However the LSE has been buoyed by the news that the US Department of Justice has dropped its own investigation.

The EC's review is due to end in late October and the LSE is still hopeful that it can complete the Refinitiv acquisition before the year's end.

Of particular concern to European regulators is the effect that the Refinitiv takeover could have on electronic bond trading. The LSE owns MTS Markets which is one of Europe's top bond trading venues with daily turnover of €100m, while Refinitiv has a stake in Tradeweb which has a large share of the bond trading market in North America.

While the synergies between the two are seen as one of the main benefits of the takeover, they are also the biggest worry for regulators, not least because it would give the group a large share of the European government bonds market. 

In delivering the LSE's first half results, chief executive David Schwimmer announced that the possible sale of either the MTS business or the entire Borsa Italiana business could be one way to appease the regulators.  

“We want to evaluate whether there are potential benefits of keeping the two together," said Schwimmer. "We are continuing our dialogue with the European Commission, it’s constructive.”

The LSE has owned the Borsa Italiana since 2007 and it contributed 14% of the exchange's 2019 revenue. It would also give the exchange a presence in Europe following Brexit. But, should it be forced to sell the Milan-based business, there are likely to be a number of buyers willing to pay in the region of $3bn.

The Italian government, led by the populist Five Star Movement party, has also referred to the exchange as a "strategic asset" and has sppken about bringing it back within Italian borders. 

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