Italian exchange backs $2.15 billion LSE bid

Borsa Italiana has backed a 1.6 billion euro ($2.15 billion) take-over by London Stock Exchange, sources close to the situation said on Friday, bringing closer a deal that could boost the LSE's own bid defences.
"The board has given the chief executive (Massimo Capuano) the mandate to accept the proposal and do everything necessary to carry it through," said one source, who requested anonymity. The sources said the deal offers 4.9 LSE shares for every share in the Italian bourse, Europe's fourth-largest stock market operator by the total value of shares traded.
Other sources gave further details. The Italian side would provide five board members on the newly combined company and London seven. "Borsa's value is under 30 percent of the total of the two companies but the LSE is giving Borsa, which ends up under its control, a premium at the board level," one of the sources said.
LSE could not immediately be reached to comment. Borsa Italiana, which had 16.23 billion shares at issue as of March 15, is mainly owned by banks and financial intermediaries. Its largest shareholders are Unicredito with a 19.9 percent stake, Intesa Sanpaolo with 18.7 percent, and Banca Monte dei Paschi di Siena with 10.4 percent.
LSE shares closed up 0.15 percent at 1,355 pence. After two years as prey in the rapidly consolidating global exchanges sector, an agreed deal could transform the LSE into a predator alongside US rivals the New York Stock Exchange and Nasdaq Stock Market Inc.
The LSE would also beef up its access to fixed income trading. Earlier this week, Borsa Italiana exercised an option to buy NYSE Euronext's stake in MBE which controls European bond trading platform MTS. A tie-up with Borsa Italiana is nevertheless mainly seen by some analysts as a defensive move by the LSE against Nasdaq, which has kept a 30 percent stake in its London rival after a failed take-over bid.
"LSE management is likely to present the merits of the deal as increased exposure to continental cash equities and diversification to Borsa Italiana's derivatives and fixed income operations. The market is likely to be more cynical and view it as an effort to bulk up and make it harder for Nasdaq to acquire it," said Citigroup analysts.
Italian Industry Minister Pierluigi Bersani said he favoured the deal but wanted to see full details. NYSE Euronext, the world's biggest stock market operator, recently approached Borsa Italiana with its own take-over offer, sources familiar with the matter had said earlier in the week.
One of the sources said after Friday's Borsa board meeting in Milan that there had been another offer but it was not concrete enough to present to the board. Nasdaq, which is in the process of buying Nordic and Baltic market operator OMX, has indicated it would not make another European buyout until it felt comfortable with progress on this deal.