Offer Structure
The price of the Offer is EUR 33.4 per share of BME, implying the maximum amount payable by SIX of c. EUR 2,793 million. The Offer Price will be fully paid in cash.
The initial Offer Price amounted to 34 euros per share but was adjusted by the gross amount of the dividend of 0.60 euros for each share of BME paid by BME on 30 December 2019. Moreover, the Offer Price will be further adjusted by the gross amount of an additional dividend of EUR 0.42 per share that BME expects to pay on 8 May 2020, provided that the date when the Offer results are published on the trading bulletins takes place on or later than the ex-dividend date.
The initial Offer Price (EUR 34 per BME share) implied a premium of approximately:
(i). 33.86% on BME’s trading price at the closing of the stock exchange on 15 November 2019, last trading day prior to the filling of the request for authorisation of the Offer (EUR 25.40);
(ii). 36.49% on the volume weighted average trading price of the BME’s shares during the month immediately prior to the filling of the request for authorisation of the Offer (EUR 24.91);
(iii). 44.13% on the volume weighted average trading price of the BME’s shares during the quarter immediately prior to the filling of the request for authorisation of the Offer (EUR 23.59); and
(iv). 47.57% on the volume weighted average trading price of the BME’s shares during the six-month term immediately prior to the filling of the request for authorisation of the Offer (EUR 23.04).
Step-change in scale and growth potential for BME and SIX
SIX intends, through the Offer, to acquire all of BME’s shares or, at least, those necessary to acquire the control of BME Group so it becomes part of the SIX Group. BME and SIX have comparable, vertically-integrated and diversified, profitable, business models, operating along the entire value chain (pre-trade, trade, post-trade). Through the proposed combination, BME and SIX together would create an entity with the scale to pursue more ambitious growth opportunities and strategic initiatives.
In particular, the strategic rationale behind the proposed transaction is based on the following elements:
(i) Operational business fit. SIX and BME are both vertically integrated, providing services across the entire value chain (pre-trade, trade and post-trade operations). The group resulting from the transaction would benefit from a balanced, multi-asset business profile and an improved market positioning in the European financial market infrastructure industry, notably as a result of a broader product and services offering, enhanced combined technical infrastructure and the superior market data offering.
(ii) Strengthened position in Spain. SIX is convinced of the different opportunities offered by the Spanish market and intends to preserve and further invest in local infrastructures with the purpose of attracting new investors, offer new products and generate more volumes and revenues to the combined entity of the Offer. BME would be managed taking into consideration the needs and the legitimate interests of the regulators, consumers and participants of the financial markets, systems and infrastructures currently managed by SIX, with the aim of complying with all applicable regulations and regulatory recommendations, including, in particular, those aimed at limiting and adequately managing systemic risk, and safeguarding its general interest.
(iii) Geographic complementarity. The geographic footprints of BME and SIX allow for a great complementarity. As mentioned above, while BME has a strong footprint in Spain, access to the European Union market and reach in Latin America, SIX offers unique access to the Swiss financial centre, the second-largest financial centre in Europe and also provides global access into North America and Asia. Additionally, the Offeror intends BME to be the preferential platform to grow and increase its footprint in the European Union market.
(iv) Cultural fit. BME and SIX are both vertically-integrated local champions with a strong interest in strongly supporting their respective local financial ecosystems and balancing the needs of local clients and global institutions.
(v) Scale. The integration of BME into the SIX Group would create the third-largest financial market infrastructure group in Europe in terms of revenues. SIX considers that the resulting scale benefits from the transaction would significantly improve the competitiveness of both groups and in particular facilitate innovation-related investments required to endure at the forefront of industry trends. However, SIX has not quantified the potential economies of scale resulting from the combination of BME and SIX.
(vi) Highly attractive development and growth opportunities. The combination of BME and SIX would offer a highly attractive development and growth opportunities derived from cross-selling services along the full value chain, asset classes and geographies, as well as the optimisation of the cost structure and the exploitation of scale benefits.
The successful outcome of the Offer and the subsequent integration of BME in the SIX Group would also allow to focus the investments on innovation and further growth opportunities, avoid duplications and share existing best practices amongst the organizations. Both groups would also benefit from the access to a broader pool of professional and to a leadership ecosystem to achieve future profitable growth.
SIX intends to maintain BME's business with a certain degree of independence and its operating model will remain unchanged for a period of three (3) years. SIX will study, in liaison with the regulator, how to optimize the configuration of the resulting group to provide customer-oriented services.
SIX’s intention is to preserve and strengthen BME’s position in Spain through the maintenance of its brands and BME’s current business activities, headquarters, office locations and its strategy in Spain.
Future activities and locations with regards to Spain
With regards to the future activities and location of the activity centres of BME and its group companies (Stock Exchange, BME Clearing and Iberclear) SIX intends to maintain in Spain, indefinitely, the headquarters, effective place of management and the substantive operational capability (including key positions and function. As a reflection of this intention, SIX has reached an agreement with the Spanish authorities to maintain them for at least 10 years. Furthermore, SIX intends to combine in Spain the core operations of SIX x-clear and BME Clearing, subject to a detailed analysis of regulatory, legal and operations factors.
SIX will also establish a FinTech incubator and accelerator in Spain based on its successful track record with F10 in Switzerland. Leveraging this experience to Spain will enable mobility of high-quality start-ups between Spain and Switzerland, supporting the FinTech strategy of both countries.
BME Employees
In the 12 months following settlement of the Offer, SIX intends to maintain the jobs of the BME Group’s employees and that the applicable labour terms and conditions are maintained with no significant variations. Additionally, SIX will also seek to align BME’s human resources policies and the variable remuneration schemes and share-based plans with those of SIX Group.
SIX believes that the combined entity will be able to provide attractive development opportunities for employees and is committed to attracting and retaining any talent which helps maximise value of the group.
The company intends to expand the management and administration team of the group resulting from the combination of the BME Group and SIX Group and to align its structure and composition with the new and increased presence that SIX Group would have.
BME’s dividend policy
SIX has the intention to approve a new BME dividend policy that takes into account SIX’s existing policy, the local requirements of each subsidiary (including those related to regulatory issues and its ability to make dividend payment), and the conservation business policies to mitigate risks and safeguard the continuation of BME’s operations, among others.
Although SIX has not made any decision with regards to BME’s future pay-out, given the current high pay-out ratio (c. 90% of BME’s net earnings per year), BME’s future dividend pay-out ratio is likely to decrease. It is also possible that the number of dividend payments per year (currently BME distributes 3 dividends a year) may change.
In any case, the potential decrease in the dividend pay-out would be aligned with BME’s investment requirements to strengthen and further develop its capabilities as well as accelerate its growth prospects, given SIX has the intention to maintain very solid solvency levels and innovation and investment capacity.
BME´s Board
SIX has the intention that, following the settlement of the Offer, BME’s Board will be comprised of six members: three directors appointed by SIX (including the Chairperson, who will have a casting vote), one executive director and two independent directors.
SIX’s intention is that the composition of BME’s Board of Directors’ reflects the new ownership structure of the company and its control by SIX, also including independent directors, and a significant percentage of directors of Spanish nationality or with their permanent residence in Spain.
Listing of BME’s securities
SIX does not have the intention to delist BME. Even if the requirements concerning squeeze-out rights in the Spanish takeover regulations are met, SIX will not request the forced sale (squeeze-out), unless, in addition to those requirements, the shareholding corresponding to non-significant shareholders (this is, shareholders whose stake in BME is below 3%) is below 5% of BME’s share capital.
In any event, the decision concerning the exercise of a such squeeze-out right shall only be taken in close consultation with the CNMV.
In the event the free float after the settlement of the Offer was lower than 15%, SIX will analyse if increasing such free float is viable (and the extent to such free float could be extended) and make its best efforts to carry out, in the two years following the settlement of the Offer, the relevant transactions to increase such free float, so long as, in its reasonable opinion, the market conditions allow it and it is economically viable.
Financing
SIX is strongly capitalized with an A+ credit rating from Standard & Poor’s and has sufficient financing capacity and full bank support to fund the proposed transaction in cash. The envisaged funding of the proposed transaction will preserve a strong investment grade rating for the newly combined group.
SIX has provided seven first demand guarantees issued for an aggregate amount of EUR 2,792,759,637.20 (which equals the total amount for the 83,615,558 shares representing 100% of BME’s share capital), by the following financial entities: Credit Suisse, UBS, BBVA, Banco Santander, CaixaBank and Kutxabank.
These entities also provide SIX with a fully underwritten bridge facility for the funding need of the proposed transaction (assuming 100% acceptance level). The bridge facility is expected to be refinanced by an optimal mix of existing resources and long-term debt market instruments. SIX has recently secured the monetization of a part of its stake in Worldline worth c. EUR 500m via an equity collar transaction, has a significant amount of available cash on balance sheet and ample untapped debt financing capacity.
SIX is advised by Credit Suisse, Alantra and Santander (joint financial advisors) as well as Linklaters (legal advisor) on the transaction.
About SIX
SIX operates and develops infrastructure services in the Securities & Exchanges, Banking Services and Financial Information business units with the aim of raising efficiency, quality and innovative capacity across the entire value chain of the Swiss financial center. With a workforce of some 2,700 employees and a presence in over 20 countries, it generated operating income in excess of CHF 1.1 billion and Group net profit of CHF 120.5 million in 2019. SIX is an unlisted public limited company based in Zurich.
The company is owned by 122 domestic and international financial institutions, which are also the main users of its services. The shares are distributed such that no single owner or type of bank has an absolute majority.
Further information
The authorised tender offer document and its ancillary documentation shall be available at least from the day following the publication of the first announcement described in Article 22.1 of Royal Decree 1066/2007, in electronic from to any interested parties in the websites of the CNMV (www.cnmv.es), the Governing Bodies of the Securities Exchanges of Madrid (www.bolsamadrid.es), Barcelona (www.borsabcn.es), Valencia (www.bolsavalencia.es) and Bilbao (www.bolsabilbao.es), SIX Group AG (www.six-group.com), and BME (www.bolsasymercados.es)