Euronext snaps up Irish Stock Exchange in Brexit play

Euronext is expanding to Ireland by acquiring the nation's stock exchange, a hub for ETFs set to benefit as financial activities leave Britain after Brexit.

The Amsterdam-based exchange operator, which has said it is seeking to double in size, agreed to buy Irish Stock Exchange for €137 million ($163 million) from its joint owners, Investec, Cantor Fitzgerald and Irish brokerages J&E Davy, Goodbody Stockbrokers and Campbell O'Connor, according to a statement after markets closed Wednesday.

The stock jumped by 3.5%.

"This whole exchange game is a big boys' business where you have to realise economies of scale," said Steve Grob, director of group strategy at Fidessa Group.

"Euronext has proven it can go and execute on these deals, get the synergies and move on to the next deal. There's absolutely room for a nimble European player."

The acquisition gives Euronext the home venue for Irish equities but also a market for debt securities and the largest European centre for exchange-traded funds.

“This whole exchange game is a big boys' business

Ireland, which will be Euronext's sixth "core European country" alongside the main exchanges in France and the Benelux nations, is also set to add jobs from London-based banks such as Barclays, which will probably have to move staff to keep its European Union passporting rights.

The Dublin-based exchange is "ideally positioned to benefit from market opportunities in a post-Brexit environment", Euronext Chief Executive Stephane Boujnah said in the statement.

The purchase brings "leading global positions in debt, funds and ETF listings markets".

In the nine months to the end of September, the ISE's earnings before interest, taxes, depreciation and amortisation grew by 22% year on year to €8.5 million.

Revenue was €24.2 million.

As part of the takeover, ISE Chief Executive Deirdre Somers will join the Euronext managing board, taking responsibility for debt, funds and ETF listings.

"The combined firepower of Euronext and Irish Stock Exchange in the ETF business is going to be particularly important – Ireland has a fantastic listing franchise," Lee Hodgkinson, who heads Euronext London, said on a conference call.

Euronext also plans to bring listed agriculture futures to Ireland, Hodgkinson added.

The deal is expected to close in the first quarter of 2018, subject to regulatory approval.

Euronext said in July it had as much as €2 billion to invest as it seeks to diversify its revenue sources.

The world's biggest exchanges are still looking to consolidate, though Deutsche Boerse's acquisition of London Stock Exchange Group failed earlier this year.

Federico Braga, an analyst at UBS Group, said further consolidation would be challenging.

"Looking forwards, it's tough to say what the company will look at as there aren't many options available," he said.

"Multiples are high in market data and index businesses."