In conversation with PostTrade 360° on Friday morning, Euronext CEO Stéphane Boujnah describes the rationale he sees to the deal announced the evening before – his group’s acquisition of Danish CSD VP Securities – and reveals how it has quietly been two years in the making.
(Updated 27 April: More detail added.)
Thursday evening’s announcement that European exchange operating leader Euronext will take control of VP Securities changes the scene in the Nordic post-trade landscape.
“This makes our business more Nordic,” says Stéphane Boujnah, CEO of Euronext, to PostTrade 360°.
“Around 25 percent of the Euronext group revenue will now be generated in the Nordics – to compare with zero two years ago.”
With teams in Oslo, Bergen, Copenhagen, Stockholm and Helsinki, Euronext will have more than a third of its staff located in the Nordics.
In dialogue since long
The seeming swiftness of the transaction is in stark contrast against the highly public bidding war for Norway’s combined exchange and CSD operator Oslo Børs VPS last year. A general bid by Euronext was challenged both price-wise and legally by Nasdaq but Euronext came out winner. Let us come back to this later. Further, Euronext bought the Nordic spot power exchange, NordPool, this winter.
Yet Stéphane Boujnah reveals to PostTrade 360° that the VP Securities deal follows a long anchoring process – where VP Securities board-of-directors chairman Peter Lybecker has played a key role in coordinating the many Danish stakeholders.
“This is the outcome of dialogue that has taken place for two years. We have an understanding of VP Securities better than any other company we have ever bought,” says Stéphane Boujnah.
Stéphane Boujnah underlines what he sees as a logical connection and possible synergies between the Norwegian and Danish CSDs, although they are on different sides of the EU border. Beside the closeness of their locations and economies, they share the segregated account structure which differentiates the region from most of Europe – where the “jumbo”, or “omnibus”, structure dominates. The two also have a history of close relations and collaboration – and, says Stéphane Boujnah, actually a joint technological ”DNA”, since Norway’s platform was once built upon Denmark’s solution.
At large, Euronext’s discussions to acquire both Oslo Børs VPS and VP Securities first ran largely in parallel, but the challenge from Nasdaq OMX over Norway changed that, with Danish talks needing to be stalled for half a year in 2019.
This spring, the coronavirus situation has threatened to bring further delays to the Danish acquisition but the parties were determined not to let it obstruct developments.
“We are clearly not in wait-and-see mode,” says Stéphane Boujnah.
Shares view with the central bank
Thursday’s public announcement of the transaction was enabled by a crucial decision by the Danish Central Bank, which has a double role – as both key shareholder of Denmark’s central securities depository VP Securities and as regulator.
Definitive agreements have also been struck with shareholders Danske Bank, Nykredit, Nordea and Jyske Bank, guaranteeing an initial stake for Euronext of around 70 percent of the shares in VP Securities. Euronext is now opening an offer to all minority shareholders at the same terms.
The agreement sees VP Securities transform from a user-owned organisation, to one that is run commercially as part of a European industry group. Stéphane Boujnah describes the old user/owner overlap as “creating ambivalence” – and perceives that the Danish financial community is positive to saying farewell to it.
“With us, it will be part of a compact commercial, industrial and technology-driven company fully anchored in the EU capital markets. That is good news both for the teams and the clients.”
Sees no conflict in Norway
Despite the two years, he holds the Danish negotiation process as “extremely efficient”. This is in contrast against the rowdy Norwegian situation last year, where local actors including the Oslo Børs VPS board lined up behind Nasdaq OMX in its challenge against Euronext to take over. But Stéphane Boujnah strongly rejects the picture that there would have been general resistance in Norway either. Yes, there has been legitimate concrete discussion in Oslo over certain points – such as trading hours and changes in the clearing chain, where Euronext has come to halt original change plans after requests from the participants. Yet overall, he describes the public spectacle primarily as “noise” orchestrated solely by Nasdaq, using “unfounded arguments” in an attempt to “frustrate” Euronext’s Nordic entry.
“It is fact that there was actually no mobilisation of market participants,” he points out.
“I don’t even want to call it a debate,” he says – adding that relations are going very well, also with leading bank DNB which was originally a critic of the deal.
Strategy to grow post trade
For Euronext, which is a top European stock exchange operator (originally formed in 2000 from the merger of the Paris, Amsterdam and Brussels exchanges), the Danish entry also means another increase in the proportion of revenue coming from post-trade activities rather than exchange operation. This is in line with a strategic redirection of the group last year, to “build the leading pan-European market infrastructure”. In other words: growing post trade.
Euronext’s purchase in 2019 of Oslo Børs VPS was a big step in growing the post-trade revenue share, besides positioning Euronext as a Nordic actor. Adding VP Securities now takes post-trade income to a level around 23 percent of Euronext group revenues, with strong Nordic emphasis. Portugal’s CSD Interbolsa was the starting point.
See also our recent exclusive interview with Audun Bø of Norway’s VPS.