Pan-European stock market operator Euronext and Switzerland's SIX sparked a bidding war for Spain's Bolsas y Mercados Espanoles (BME) today. Both are trying to snap up one of Europe's last standalone stock exchanges. 

SIX made a friendly all-cash offer for the Spanish bourse, whose shares jumped by more than a third in early trading.

Euronext said it was in talks with BME with a view to a potential bid, without saying how much it was prepared to pay.  

With European sector leaders Deutsche Boerse and London Stock Exchange effectively too big to consolidate without raising serious competition concerns, mergers are focused on smaller players, with Euronext having already scooped up the Dublin and Oslo exchanges.

SIX has offered BME €34 per share, implying a total equity value of €2.843 billion, a hefty 34% premium over BME's market capitalisation of just over €2 billion before the offer was announced.

The Swiss exchange's proposed deal is "very much" about growing the revenues of both businesses, SIX chief executive Jos Dijsselhof told reporters today.

He added that BME are "happy with the commitments made by SIX thus far".

"They have stated we are offering a fair price. It is our expectation we will retain the listing," Dijsselhof said, adding that it was too early to talk about raising the offer.  

Shares of BME, among the smallest of Europe's exchanges, were up 37% at €34.7 today. It said SIX's offer "reasonably" reflected its current value.  

Euronext, which has a market cap of around €5 billion euros, had denied earlier this month that it was bidding for BME.  

BME board members and shareholders must now decide whether to wait for any formal Euronext offer before deciding on the Swiss bid. 

Euronext said last month it has several hundreds of millions of euros for acquisitions and could tap markets to boost its war chest to over €2 billion. 

Taking over BME would not dramatically alter the overall European exchange landscape, but would help to buttress SIX or Euronext. 

Euronext, whose shares rose 1.4% to €72.85 today, is a minnow compared to LSE and Deutsche Boerse, which have market capitalisations of £24 billion and €26 billion, respectively. 

But it has gradually built up its presence and now operates exchanges in Norway, Netherlands, Belgium, Portugal, France and Ireland, with Spain an obvious gap. 

SIX is focused on Switzerland and buying BME would give it a base inside the European Union and put the combined group in third place behind LSE and Deutsche Boerse in terms of revenues and profit, Citi said. 

An EU base would be a boost to Switzerland after Brussels blocked EU-based investors from trading on Swiss exchanges from July this year as a row escalated over a stalled bilateral treaty. 

SIX said the deal would have no bearing on Bern's broader political discussion with Brussels, a row which has also meant that Swiss shares can only be bought and sold via Switzerland's two exchanges.

Analysts at Citi said buying BME would enable the Swiss bourse to offer clearing and settlement of shares inside the EU by using the Spanish bourse's infrastructure. 

SIX said its proposed purchase would be financed through a combination of existing cash resources and access to capital markets. 

Brokers in Madrid said that as a standalone exchange, BME had been diversifying revenues away from a shrinking volume of share trading.  

Spain would likely need reassurances that local jobs would not be lost if trading in Spanish shares migrated to a central platform run by SIX or Euronext. 

The country's government, which is expected to have the final say on any takeover, and Spanish markets watchdog CNMV had no comment. 

BME said it would keep its current business activities, Spanish headquarters and local strategy for a four-year transitional period at least.