Jefferies says price paid to LSE Group for Borsa Italiana 'reasonable'

Analysts at Jefferies sounded a positive note on Euronext's acquisition of Borsa Italiana from the London Stock Exchange Group, highlighting both the price paid and the strategic rationale behind the transaction.

On a pre-synergies basis, the purchase was priced to go at 16.7 times' the stock exchange operator's adjusted earnings before interest, taxes, depreciation and amortisation.

In the investment bank's judgement, that "looks reasonable" when compared against an average transaction multiple for mergers and acquisitions related to market infrastructure of 15.5 "as exchanges of this size & quality rarely come to market".

Significantly, Jefferies did not expect the acquisition to result in any change to Euronext's policy of paying out 50% of its reported net profit in dividends.

Regarding Euronext's targets for synergies, Jefferies pointed out that the exchange operator had a track record of under-promising when it came to the costs side of the equation.

Borsa Italiana was also expected to afford "much-needed scale and strategically important product capabilities, including clearing and electronic fixed income trading."

Jefferies stood by its 'buy' recommendation and €113 target price on the shares.