ICE to Initiate Euronext IPO - Analyst Blog

IntercontinentalExchange Group Inc. ICE, or ICE Group, has drafted its plan of action to deal with Euronext NV platform, which was part of the NYSE Euronext acquisition in Nov 2013. The company has scheduled an initial public offering IPO for Euronext by Jun 2014-end. However, the details of shares and pricing remain undisclosed.

Before the IPO, a 33% interest in Euronext will be divested to a consortium of ten investors, which include, Banco Espirito Santo SA, BNP Paribas SA, ABN Amro Group NV, Societe Generale SA and Euroclear SA/NV. These investors will be required to hold their stakes for at least 3 years, post the offering.

Following this development, the IPO will likely to be executed in a two-part offering. In the initial tranche, the institutional and retail investors in the Netherlands, France, Belgium and Portugal will be involved through a secondary sale. The remaining shares will then be offered to institutional investors in other jurisdictions, including that of the U.S., through private placement.

The pan-European Euronext platform owns the equity, fixed income and derivatives exchanges in Paris, Amsterdam and Brussels, where it will likely be listed initially. ICE Group further plans to list Euronext in Lisbon exchange, also owned by Euronext, by the end of 2014.

These four exchanges are expected to enhance, trading activity and operational transparency, while creating new demand for various capital sources from the economic recovery in Europe. In Jan 2014, Euronext was valued within $2.1−2.5 billion.

We believe the IPO and part-sale of Euronext will further boost operating leverage, cost synergies and liquidity. ICE Group plans to utilize the proceeds from the disposition of Euronext to de-leverage its balance sheet.

Alongside, the decision to spin-off Euronext was backed by regulatory concerns in Europe regarding antitrust issues. Previously, ICE Group was also to retain 25% stake in Euronext for 2 years after the IPO, except if it can pool in more long-term investors. Nevertheless, ICE Group aims to exit the Euronext business completely in the future.

Currently, ICE Group has a Zacks Rank #3 (Hold). Some better-ranked financial stocks include Ladder Capital Corp. LADR, HCI Group Inc. HCI and Hallmark Financial Services Inc. HALL. All these stocks sport a Zacks Rank #1 (Strong Buy).