Italy’s ruling coalition debates bid for Borsa Italiana

Italy’s coalition government is debating whether to bid for all or part of Borsa Italiana as Rome seeks to take back control of strategic assets including government bond-trading infrastructure, according to four people involved in the plans.

The discussions come as the government is considering expanding its so-called golden power to the financial sector and financial infrastructure, which would allow Rome to block or restrict market operations considered a threat to national interests. They also come as the government is stepping up efforts to mitigate the devastating economic fallout of the Covid-19 crisis.

Work on a possible bid for the Milan stock exchange has intensified in the past weeks as its owner, London Stock Exchange Group, seeks EU antitrust approval for its $27bn merger with data group Refinitiv, and may be forced to sell assets as a result, according to the people involved in the talks, who spoke under conditions of anonymity because a final decision has yet to be made.

After a cabinet meeting on Thursday night, Prime Minister Giuseppe Conte met with finance minister Roberto Gualtieri and Treasury officials to discuss options for Borsa Italiana and whether to instruct state lender Cassa Depositi e Prestiti to formally hire investment bank Mediobanca as an adviser as soon as next week, the people said.

LSE bought Borsa Italiana for €1.7bn in 2007. Business newspaper Milano Finanza reported in November that Mediobanca estimated the Italian stock exchange to be worth between €3.5bn and €4bn.

Supporters of the acquisition include Mr Conte and ministers of the Five Star Movement, the anti-establishment party. They argue the state needs to control the exchange’s sovereign bond-trading platform, MTS. Cassa Depositi e Prestiti would make the acquisition, according to the people involved in the plans. Milan-based Mediobanca had been informally advising Mr Conte on the matter, they said.

However the finance ministry, CDP’s largest shareholder, is taking a cautious approach. Junior coalition partners — including members of former prime minister Matteo Renzi’s Italia Viva party — believe the government should focus on other priorities and fear that nationalising the Milan exchange would unnerve investors and reduce demand for Italian bonds, according to the people involved in the discussions.

“The whole government coalition agrees Borsa Italiana is a strategic asset and it’s important to do what is necessary to safeguard it and enhance it,” said Claudio Mancini, a lawmaker for the Democratic party, one of the junior coalition parties.

The finance ministry, Mediobanca and LSE declined to comment. The CDP said: “We don’t have a file open on this right now.”

LSE has previously said it had no plans to sell its Italian unit. However one area of potential overlap with Refinitiv is with the LSE’s bond-trading venue, MTS and Tradeweb, in which Refinitiv holds a 54 per cent economic interest. Both boast an extensive share of European sovereign debt-trading.

Mediobanca bankers have suggested the government make a pre-emptive offer for Borsa Italiana before June 22, the people said, when Brussels is due to approve the LSE-Refinitiv merger, or trigger a deeper investigation. Euronext, which operates six equity exchanges across the continent including Paris and Amsterdam, is among parties that have expressed an interest in the Milan-based stock exchange.

“We must act before Euronext does if we want to defend our strategic interests,” said one of the people involved in the preparations.

Italy is now the largest sovereign debt market in the eurozone and its total borrowings are expected to rise to about 155 per cent of gross domestic product this year, according to credit rating agency Fitch. 

MTS, Borsa Italiana’s bond-trading unit, started as a venture between the Italian Treasury and the Bank of Italy as a way for banks to bid competitively for bonds. The LSE holds a 62 per cent stake in MTS via Borsa Italiana, with a consortium of banks holding the rest.

“One thing is buying back strategic assets, another is to buy the whole asset and have a lot more negotiating power if at some point other eurozone stock exchanges want to merge it,” another said. 

Additional reporting by Philip Stafford in London

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