Euronext Makes Offer for Allfunds

Narrow-moat Euronext ENX confirmed media reports that it has made a conditional offer to acquire fund distribution platform Allfunds. The European exchange group offered EUR 8.75 for each outstanding share of Allfunds, valuing its equity at EUR 5.5 billion. The offer comprises a EUR 5.69 cash component with the remainder paid in shares, enticing shareholders with a 19% premium above the Feb. 21 closing price. The transaction is conditional on approval by the largest shareholders (BNP Paribas with a 12.1% stake and private equity consortium LHC3 with 34.3%). We maintain our EUR 88 fair value estimate.

The interest in Allfunds makes strategic sense for Euronext, which is on a path to further diversify its business from volatile trading volumes toward more stable fee and subscription-based income streams. The fund distribution business also fits nicely with Euronext’s large geographical coverage in Europe and its strategic positioning with its local central securities depositories. Deutsche Boerse, a former suitor of Allfunds, has been building the largest competitor to Allfunds in the last couple of years through the acquisition of UBS’ Fondcenter and Kneip.