Euronext to sell 20% stake in EuroCCP to Cboe Global Markets

Maria Nikolova

Euronext expects to receive net proceeds of approximately €9 million from the sale of its minority stake.

Euronext NV (EPA:ENX) has earlier today announced it has entered into a binding agreement to sell its 20% minority stake in EuroCCP to Cboe Global Markets, alongside the other current EuroCCP shareholders.

Euronext stresses that it will continue to leverage its long term derivatives clearing agreement with, and its 11.1% equity stake in, LCH SA, and develop its two fully-owned CSDs in Norway and Portugal, as the foundation for further growth in Post Trade.

The transaction is expected to close in the first half of 2020, subject to receipt of required regulatory clearances and the arrangement of a supporting liquidity facility at the EuroCCP clearing entity level.

Euronext anticipates to receive net proceeds of approximately €9 million from the sale of its minority stake. As a result of this agreement, Euronext will impair the value of its participation by approximately €6 million in the final quarter of 2019.

In its announcement about the acquisition of EuroCCP, Cboe explains that while it expects its plans to acquire EuroCCP and pursue equity derivatives trading and clearing in Europe to generate positive financial returns longer-term, these initiatives are expected to be dilutive to earnings over the next three to four years.

The potential impact to Cboe’s earnings per share is currently anticipated to be in the range of $0.08 to $0.10 for 2020 and 2021. The estimated earnings per share impact is as follows: (1) a portion reflects the potential acquisition of EuroCCP, representing about half of the estimated earnings per share impact in 2020 and neutral to slightly positive estimated earnings per share impact in 2021 and (2) the remaining portion in 2020 and 2021 primarily reflects Cboe’s planned investment in building out its European derivatives clearing and trading business.

This investment is expected to have the greatest negative earnings impact in the first few years as Cboe ramps up its European derivatives trading and clearing and builds sufficient scale. The potential expense impact from these initiatives is not reflected in the company’s 2020 expense guidance that was reaffirmed on November 1, 2019.

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