(News Bulletin 247) – The operator of the Paris Stock Exchange has decided to withdraw its indicative offer to buy this Spanish company specializing in the distribution of funds.

Euronext prefers to stop fees rather than overpay. The pan-European stock exchange operator, which manages the Paris, Milan, Oslo, Brussels, Lisbon, Amsterdam and Dublin stock exchanges, indicated last week that it had submitted an indicative offer to the board of directors of Allfunds, a Spanish company specializing in the distribution of investment funds.

According to Allfunds, this offer had been submitted on the basis of a price of 8.75 euros per share, which would have translated into a total amount of 5.52 billion euros (in equity value).

Euronext, like the other major stock exchange operators, is on the lookout for targets to participate in the consolidation of its sector, which is above all a fixed cost industry, allowing significant economies of scale and therefore synergies.

An “inadequate” offer

But the group cannot afford to overpay for its acquisitions. In a very brief press release published on Wednesday, the stock market operator announced that it had informed the board of directors of Allfunds that it was withdrawing its offer for 100% of the capital of the Spanish company.

The pan-European group did not comment further. But Allfunds in its own press release states that Euronext’s proposal was “inadequate”, therefore probably not high enough.

On the Paris Stock Exchange, investors are breathing, the Euronext share taking 5.2% around 9:45 a.m., one of the largest increases in the SBF 120.

The market had hardly appreciated the company’s appetite for Allfunds, given the size of the operation at potential dilution, the indicative offer of Euronext including, according to Allfunds, a potential capital increase to offer a securities component. The action had lost more than 11% in two sessions following the Euronext announcements.

A lack of strategic rationale?

Jefferies notes in a note that investors “have, in our view, rightly supported Euronext management in its willingness to undertake mergers and acquisitions, given its successful track record of integrating operations and regular realization of cost synergies”.

However, the indicative offer for Allfunds “did not share, at first sight, the many characteristics which contributed to this reputation, leaving investors to wonder about the strategic logic of the operation”, points out the bank.

“There are still a number of potentially transformative transactions that Euronext could pursue – as soon as they become available – and which would be likely to receive strong shareholder approval”, nevertheless judges Jefferies.