STREET BUZZ

London/Milan, June 24 (Reuters): The London Stock Exchange will buy its Italian counterpart for 1.6 billion euros ($2.15 billion), the two exchanges confirmed in a statement on Saturday. This is the latest step in a global consolidation of exchanges.

The LSE and Borsa Italiana said they planned to become “the world’s capital market” and that together they accounted for 48 per cent of the FTSE Eurofirst 100 index of companies by market value.

They would also be Europe’s leading market for electronic trading of funds and securitised derivatives, and Europe’s leading fixed-income market, thanks to Borsa’s interest in the MTS platform.

Analysts see the deal as defensive on the part of the LSE, which has faced repeated takeover attempts as the world’s exchanges respond to competitive pressures and globalised trading opportunities. Some viewed it as a move to make it harder for Nasdaq to buy the LSE. The enlarged group will be worth £3.9 billion.

Borsa Italiana’s board backed the deal on Friday despite an approach from NYSE Euronext, sources had said earlier this week.

New name

A joint statement said the transaction will be “earnings neutral to positive in 2008 and earnings accretive by at least 10 per cent in 2009”.

They said the deal will lead to annual revenue synergies of 29 million euros in 2011, along with cost synergies and savings of about 29 million euros a year.

Borsa Italiana shareholders will get 4.9 LSE shares for every Borsa share.

The Italian exchange, which had 16.23 billion shares in issue as of March 15, is mainly owned by banks and financial intermediaries.

Its largest shareholders are Unicredito with a 19.9 per cent stake, Intesa Sanpaolo (18.7 per cent) and Banca Monte dei Paschi di Siena (10.4 per cent).

The LSE said it was confident its shareholders will back the deal. The companies said they planned to change the name of the combined group to reflect its international profile, and will be listed on Borsa Italiana as well as in London.

The exchanges will maintain separate legal and regulatory entities. They confirmed that of the 12 board members, seven will be from the LSE and five from Borsa Italiana.