European stock exchange operator Euronext says it would be prepared to sell off its clearing operations in order to make a bid for the London Stock Exchange (LSE), according to a report by the Financial Times.
Euronext's undislosed bid for the LSE - along with an offer from Deutsche Börse - is currently being investigated by the UK's Competition Commission.
In July the watchdog said a takeover of LSE by either Deutsche Börse or Euronext would harm competition by requiring customers to use their respective clearing services. Deutsche Börse owns clearing services provider Eurex Clearing, while Euronext owns 41% of LCH Clearnet, the current clearing services provider for the LSE.
But according to the report, Euronext would be willing to sell its stake in the clearing group if forced to do so, particularly as the unit is not performing well - in H1 2005 settlement and custody accounted for less than five per cent of its revenues.
Jean-François Théodore, chief executive of Euronext, told FT reporters that the exchange is a "natural partner" for the LSE and he is convinced the acquisition would "create a lot of value".
He was speaking as the Paris-based exchange reported a 0.3% decline in first half revenues, to EUR461m. But the exchange says its continued focus on cost cuts led to a 23% increase in first half net profit from EUR80.0m in 2004 to EUR98.4m in the first half of 2005.
Théodore says Euronext has spent EUR12m on consultancy fees relating to the LSE bid. But the exchange is still waiting for the Competition Commission to publish its report into both the Euronext and Deutsche Börse takeover bids. The watchdog recently extended the deadline for its inquiry by eight weeks to 7 November.
The LSE rejected a second bid offer from Deutsche Börse in December last year which was worth around £1.35bn. The German exchange faced increasing opposition to its takeover plans from its shareholders, which eventually led to the resignation of CEO Werner Seifert in May.
Last month, Australia's Macquarie Bank said it may make a cash bid for the LSE as part of a consortium and rumours surfaced that Stockholm-based OM Gruppen was also considering a takeover bid for the LSE.