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Euronext hits reset button for Allfunds' M&A prospects after dropping bid

FILE PHOTO: Logo of Euronext is seen on the headquarters at La Defense business and financial district in Courbevoie near Paris

By Mathieu Rosemain, Huw Jones and Pablo Mayo Cerqueiro

PARIS/LONDON (Reuters) - Exchange operator Euronext has hit the reset button for Allfunds' takeover prospects after giving up on buying the fund distribution company, fuelling speculation that other suitors may step in.

Euronext last week had made an indicative cash-and-shares offer for Allfunds of 5.5 billion euros ($5.86 billion), sending its own shares down in a sign of shareholder skepticism.

On Tuesday, Euronext withdrew its indicative offer, and Allfunds said its board had considered the terms inadequate and discussions were terminated.

While not a game-changing deal, Allfunds would have helped Euronext catch up with rivals like London Stock Exchange Group, ICE and others, which have been diversifying away from traditional trading activities into areas like data and analytics.

Allfunds would have added a new layer to Euronext's business, helping fund management companies to sell funds across borders and navigate complex data rules.

After the merger talks ended, Euronext said the company made its decision after conducting due diligence.

An Allfunds spokesperson said: "Other than a discussion about the company's publicly disclosed financials, Euronext received no other access to due diligence."

Euronext's withdrawal leaves the field clear for others to swoop in, a source close to the initial talks between Allfunds and Euronext said.Potential bidders, including buyout funds, are now considering throwing their hat in the ring, a second source said, adding that private equity would be able to raise money for a takeover.

Analysts have also tipped Germany's Deutsche Boerse as a potential bidder for Allfunds, with a view to bolstering its existing fund services operation.

"By virtue of doing nothing, we believe Deutsche Boerse comes out on top from this episode," analysts at Jefferies said. A deal "could yet come back for Allfunds, but there is no obvious time imperative."

A Deutsche Boerse spokeswoman declined to comment.


Euronext had so far focused on snapping up national exchanges, most recently Borsa Italiana, to become a pan-European stock exchange, with bourses in Amsterdam, Brussels, Dublin, Lisbon, Oslo and Paris.

There are few European exchanges left for Euronext to buy, and further acquisitions could run up against competition constraints.

ING analysts considered Euronext's indicative offer as too low. "Clearly, so did the Allfunds board and majority shareholders," the analysts said.

Euronext's sudden change of mind is an unusual move for CEO Stephane Boujnah, although Euronext does have strict financial conditions on takeovers, meaning it cannot pursue a deal at any price.

Any takeover must have a return on capital goal above the weighted average cost of capital after three to five years, as per Euronext's own investment criteria.

Euronext is also building up activities in stock and derivatives clearing, and needs to avoid the distraction that a contested and expensive takeover bid would bring.

($1 = 0.9389 euros)

(Reporting by Mathieu Rosemain, Huw Jones, Pablo Mayo Cerqueiro and Chiara Elisei; Editing by Jane Merriman)