By Andres Gonzalez
LONDON (Reuters) -Exchange operator Euronext has submitted a preliminary offer to buy fund distribution firm Allfunds for 5.5 billion euros ($5.85 billion) in a deal that would help the Paris Stock Exchange operator advance diversification.
Euronext said on Wednesday it was discussing with Allfunds' largest shareholders about a takeover, and Allfunds' board was considering the offer.
Euronext, which also controls the Amsterdam stock exchange, is offering 8.75 euros per share, consisting of 5.69 euros per share in cash plus 0.04059 new shares.
Although the offer values Madrid-based Allfunds above Tuesday's market cap of 4.6 billion euros, it is still below the 7.2 billion euros the distribution firm reached in its Amsterdam listing in 2021.
Exchanges have been seeking to diversify their businesses away from trading of securities to bolster income and reduce their exposure to swings in asset prices.
Over the past few years, Euronext has been involved in a series of acquisitions, including the integration of the Milan bourse, which the company bought in a 4.4 billion euro deal in 2021.
Its bigger competitor, the London Stock Exchange Group (LON:LSEG), bought financial data provider Refinitiv for $27 billion. Thomson Reuters, which owns Reuters News, has a minority shareholding in LSEG.
Jefferies analysts said in a report published after the announcement that Deutsche Boerse (ETR:DB1Gn) could also emerge as a bidder, given its greater flexibility on calibrating a cash and share-based offer.
Hellman & Friedman is Allfunds' largest shareholder, with a 34.3% stake, while BNP Paribas (EPA:BNPP) controls 12.1% of the group. Credit Suisse (SIX:CSGN) sold an 8.6% stake in Allfunds in October last year.
In the first six months of 2022, Allfunds increased its adjusted EBITDA by 4% year-on-year to 188 million euros.
Allfunds shares soared as much as 29% to 9.445 euros following the news, hitting their highest level since May and were last up 17.25% at 8.6 euros. Euronext shares fell 7.44%.
Allfunds' assets under administration decreased 8.6% year on year in the third quarter of 2022 to 1.29 trillion euros as a result of continued new client migrations offsetting outflows from existing clients.
Euronext said there was no certainty that it would make a binding offer.
The offer was first reported by Bloomberg.
($1 = 0.9405 euros)