The London Stock Exchange is in advanced talks about a friendly takeover of the Borsa Italiana, the user-owned equities, bond and derivative trading platform that serves the Italian market.

It is understood the deal values the Borsa at about €1.5bn (£1bn), just above the €1.2bn to €1.4bn valuation placed on it by its bankers last year as it considered an initial public offering.

The terms of the deal, which would be in cash and shares, call for considerable autonomy to be granted to the operators, who are also seeking guarantees that would keep tariffs at low levels.

The move pits the LSE against NYSE Euronext, but comes as the Milan exchange last night exercised an option to take full control of the MTS bond trading platform it shares with Paris-based Euronext.

On Wednesday, the LSE confirmed it was in talks. Its board is set to confer on Thursday. The Borsa board will also meet on Thursday to discuss the offer. NYSE Euronext declined to comment.

But investors reacted negatively to the prospect of the acquisition. Shares in the LSE fell 24p or 1.8 per cent to £13.42.

Massimo Capuano, the Borsa’s chief executive, has long favoured a merger with the LSE. But a tie-up with the Borsa could put the LSE at odds with its largest shareholder, Nasdaq, which would see its 30 per cent stake diluted as a result of any deal.

NYSE Euronext, which held talks with the Borsa last summer, has expressed interest in re-opening talks, possibly complicating the LSE’s deal. Some of the Borsa’s shareholders favour a merger with Euronext.

MTS, created by the Italian government to ensure transparency and liquidity for euro-
denominated government bonds, was sold last year, with 51 per cent owned by Euronext and 49 per cent by the Borsa.

But the Borsa said it retained an option to repurchase control because Euronext’s deal with NYSE had triggered a change of control. NYSE Euronext last night announced that the option had been excercised.

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