(Adds Euronext comments, analyst, updates shares)
By Huw Jones, Valentina Za and Maya Nikolaeva
LONDON/MILAN/PARIS, Sept 18 (Reuters) - London Stock
Exchange entered exclusive talks to sell Borsa Italiana to
Euronext on Friday, with the French operator seeing off Deutsche
Boerse and Switzerland's Six as it bids to add another bourse to
its pan-European network.
Dubbed "Project Botticelli", the LSE's sale of the Milan
stock exchange is sensitive in Rome due to concerns about who
takes control of its bond platform, which handles trading of
Italy's 2.6 trillion euros ($3.1 trillion) of government debt.
The LSE is selling Borsa as part of regulatory
remedies to see through its $27 billion purchase of data
provider Refinitiv, which is 45% owned by Thomson Reuters
, parent company of Reuters News.
It was not immediately clear what Euronext had
offered to gain exclusive talks, but investors welcomed the move
and its shares were up 5% at 0946 GMT. LSE stock was up 0.7%.
Offers for Borsa valued it at up to 4 billion euros, sources
said before the LSE board reviewed the bids on Thursday.
Chief Executive Stephane Boujnah declined to comment on the
value of Euronext's bid, but told Reuters that price was one of
several elements LSE had taken into consideration.
Boujnah said Euronext had always considered Borsa "a natural
fit" and contacts had accelerated since July after years of
informal discussions with all relevant stakeholders.
"It's a natural enlargement of Euronext within a framework
that already existed, clearly with an unprecedented size. It's
the first time we're welcoming within Euronext a G7 economy, the
third economy of the European continent with everything that is
related to that," Boujnah added.
Euronext had moved to win round both the LSE and Rome by
teaming up with Italy's state investor Cassa Depositi e Prestiti
and Italian bank Intesa Sanpaolo in order to gain
Italy's buy-in.
Both CDP and Intesa will become shareholders in the French
exchange operator, if the bid for Borsa succeeds, by subscribing
to a proposed capital increase.
'ITALIAN ECOSYSTEM'
Under the proposed deal, CDP would have a seat on Euronext's
supervisory board, with a second Italian candidate proposed as
an independent board member who would become chairman, in a nod
to how Milan would be the largest contributor to Euronext
revenue at roughly 35% of a combined group.
Borsa would join exchanges under the Euronext banner that
span Dublin and Oslo to Brussels, Amsterdam and Paris, and add
significant bond trading, clearing and settlement capacity.
"Key businesses and central functions of the new group would
be based in Milan and Rome," Euronext said.
The deal would give Euronext much-needed scale, ownership of
a clearing house with critical mass, and scope to scale the
business internationally, analysts at Jefferies said.
It would also bring Milan under euro zone ownership after
Britain left the EU, a move likely to please Brussels
policymakers who want to buttress the bloc's capital market.
"The Italian government expressed a preference to have a
solution, a project within the European Union, within the single
market, the euro zone," Boujnah said.
Switzerland's Six had no comment, while Deutsche Boerse
said it had made an attractive offer that would have
given Milan a high degree of autonomy.
LSE Chief Executive David Schwimmer appears keen to have a
deal fleshed out before Dec. 16, when EU competition officials
decide whether to approve the Refinitiv takeover.
Goldman Sachs and Morgan Stanley advised LSE on the sale,
while Euronext was represented by JP Morgan and Mediobanca and
Lazard worked with CDP.
($1 = 0.8435 euros)
(Reporting by Muvija M in Bengaluru, Pamela Barbaglia and Huw
Jones in London, Mike Shields in Switzerland and Tom Sims in
Frankfurt; Editing by Patrick Graham, Jason Neely and Alexander
Smith)
