Successful takeover bid by SIX of Bolsas y Mercados Españoles

Zurich-based financial market infrastructure service provider SIX successfully completed the acquisition of Spanish stock exchange and financial market group Bolsas y Mercados Españoles (BME) in Mid-June. Through this acquisition, SIX and BME will together become the third largest financial market infrastructure group in Europe and the tenth largest worldwide. 

FOCUS talked to Jos Dijsselhof, CEO of SIX, about the deal, vision, strategy and expectations for the combined organization.

FOCUS: Jos, back in November SIX announced the tender offer for BME. But then in March the year took a turbulent turn with Covid19 hitting the globe and as an immediate consequence the global stock markets collapsed as sharply and rapidly as never before. 

Jos: In these recent weeks and months, the stock markets have once again demonstrated their central responsibility. If you look at March, the coronavirus crisis created unprecedented market turmoil. Despite these extraordinary circumstances, the Swiss Stock Exchange (like many other exchanges) continued to ensure fair and orderly trading, enabling investors to adjust and implement their investment decisions at all times.

At times we had three times the normal trading volume, the highest in our history in fact. Our systems coped with these volumes without any problems, and our employees, most of whom were working from home by then, coped with it brilliantly. Now the volumes have almost returned to normal.

And if Covid19 hadn't been stressful enough for the running business, you have successfully completed the biggest acquisition by SIX in its history - the BME acquisition - in the middle of the global Covid crisis.

Yes, that was certainly challenging. With the successful completion of this transaction, we have laid the foundations of what is now the third largest infrastructure operator in Europe. The combination of BME and SIX will provide us with the strength and scale to address the challenges presented by current circumstances, and to serve our market participants more effectively in the years to come.

Why is SIX buying a Spanish stock exchange for € 2.75 billion, whose earnings and profits have been shrinking for years? 

In recent years, there has been massive consolidation in the European stock market landscape, where you need more and more size in order to run the business profitably. After us, BME was the largest remaining stand-alone exchange and, much like SIX, it is one of the few that still covers the entire value chain in exchange trading and post-trading. It is also domiciled in one of the largest and most underestimated economies in Europe. This overall package makes BME very attractive and the deal makes sense. We believe we can leverage strong synergies as the new number three in Europe.

That said I believe that the merger will not only create a group with the size and flexibility to invest in innovative solutions for customers and partners, but also to benefit from each other’s respective strengths.

Let’s stay with the consolidation topic. Could you elaborate a bit further what that means for SIX?

Certainly. Look, in a highly competitive environment with an ongoing consolidation of national stock exchanges, this transaction represents a strong signal for the Swiss and Spanish markets. As a result of the transaction, both financial markets will be strengthened sustainably.

The integration of the products and services will enable SIX and BME to create value, increase turnover and be even more attractive for customers. This will be crucial for ongoing competition. Together, SIX and BME will be able to drive forward the transformation of the financial markets and further expand their own business and the ecosystems surrounding it.

And what does that mean for the customers of SIX and BME?

I see the role of stock exchanges today in supporting the economy, providing fair and orderly transparent markets for financing companies and providing investment opportunities. During Covid19 this has never been more obvious. The combination of BME and SIX creates a stronger, more diversified group with an expanded global presence and a unique ability to respond to the increasingly demanding needs of customers.

We are committed to preserving and strengthening BME’s position in Spain. The combined group will create innovation hubs in Spain and attract new pools of capital to the Spanish market. We look forward to fulfilling the various commitments we have made to the Spanish authorities ahead of the integration process, which we have already begun.

What more is in it for the Spanish market?

Together we have a stronger business model that will enable us to continuously improve our products and services offering as well as significantly grow our client reach.

The combined group will now be able to better address the growing needs of the Spanish market and at the same time expand its global footprint. BME will continue to respond to the needs of its clients and its market, as part of a stronger group that is eager to invest and innovate.

To summarise it: SIX and BME are well established in Switzerland and Spain and will continue to serve their domestic markets while growing their global footprint. The combination will benefit from a more balanced, multi-asset profile, with a stronger positioning in Europe’s financial market infrastructure.

One topic needs to be addressed before we end this interview. A year ago, the European Commission withdrew its recognition of equivalence for Switzerland and thus also for SIX. Does the takeover of a stock exchange in the European Union now have an impact on it?

No. Despite the BME takeover, we won't suddenly be able to trade Swiss shares in Madrid or Spanish shares in Zurich precisely because we lack EU recognition. It will probably only come back when we first reject the restriction initiative in Switzerland and then have Brussels and Berne to agree on a new treaty. Before that, however, Brussels and London will probably first have to agree on a post-Brexit world. With the successful acquisition, we will have a foot in the European Union, but no change in the current equivalence regime.

Why do you still want the recognition? Thanks to the ordinance adopted by the Swiss Federal Council in November 2018, the ban on trading Swiss shares in the EU, basically the entire volume of Swiss blue-chip shares has flowed to you.

We are of course pleased that our market share has increased to nearly 100% thanks to the countermeasures of the Swiss Government. But even if we should receive recognition again and the market share would as a consequence decrease again, I believe that investors will continue to appreciate the advantage of the high liquidity and tight spreads on SIX. The volumes that came to us after the countermeasures were taken are unlikely to flow out again at the same rate. But we believe in free markets and competition. In the long term, this will bring more benefits to all market participants, ensure better prices and more innovation.